Examination of Witnesses (Questions 420-439)
SIR MICHAEL
LYONS AND
MS SALLY
BURLINGTON
5 JULY 2006
Q420 Chairman: Their interest gets
a little less, Sir Michael, when they are asked for money.
Sir Michael Lyons: I can see why
you might have reached that conclusion. My understanding is that
it is not the principle; it is the price, like with so many other
things in life. In short, where this came to my attention most
clearly was while I was being approached about infrastructure
projects in the debate about relocalisation of the business rate,
which is one of those things that I was asked to look at, and
where the business community at a national level are quite clear
that they want to maintain the uniform business rate. That would
not be surprising given that it has the certainty of only going
up by the rate of inflation and now represents a smaller proportion
of the cost of local public services than it did when it was first
nationalised. It is not surprising that they would find that an
attractive proposition, but when you get beyond that into more
detailed discussion consistently business communities have said
to me that they do not believe that local government, as a result
of the severed link, pays as much attention to the needs of business
as it once did. They want to see issues, including infrastructure
and skill issues, back on the local agenda and given higher priority,
and they go from that to saying on occasion, not consistently,
that actually it may be that that would require a bigger contribution
from the business community, but they want to feel that the purpose
is identified and they certainly want to feel that the money is
spent locally, and that is a challenge in our very complicated
and ambitious equalisation system.
Q421 Clive Efford: Have you explored
the potential for raising resources through capturing land values?
Sir Michael Lyons: Not in detail.
We have done a little bit of work on the US system of taxing increment
financing and are watching with great interest the debate and
possibly experimentation on planning gain supplement, so clearly
this is a live issue and I hope to learn more by the time I finish
my work in December.
Q422 Clive Efford: PTEs have said
to us that Transport for London has the benefit of receiving the
revenues from the fare box and that this is something that they
would benefit from. Have you looked into that at all? Do you have
a view on whether we should change that?
Sir Michael Lyons: Within the
review that is not an area that I have looked at. However, I was
very taken, and at the moment I am acting Chair of the Audit Commission,
by that piece of work done with the National Audit Office on supply
chain analysis, looking at the PSA for increasing bus ridership,
and the lesson that I drew from that study is very clearly that
it is the political leadership and the different regulatory framework
in London that explains the difference in terms of the improvement
in bus ridership in London compared with other parts of the country.
Graham Stringer: I like that answer a
lot. Let me start with a general question. Given your distinguished
background in local government, Sir Michael, do you not, rather
than being diplomatic, sometimes just want to sit back and scream
that the emperor has no clothes? How dare the Government that
runs the Home Office and various other offices of state tell local
government that has never run anything as badly as the Home Office
how to do it?
Q423 Chairman: I think that is called
leading the witness, Sir Michael, but by all means do comment
if you want to.
Sir Michael Lyons: I think the
comment stands without needing embellishment by me.
Q424 Graham Stringer: I will take
your grimace, which does not get into the record, as agreement.
In quantitative terms we have been trying to establish the cost
of central government control and interference in local transport
plans. It is quite difficult to quantify. We have had witnesses
here who say, "We spend an awful lot of time on this, there
are abortive costs, there are real costs to preparing things that,
if we did not have to talk to the Department for Transport, would
be less". Have you attempted to quantify that?
Sir Michael Lyons: No, I have
not, although some of the evidence that has been submitted to
me tries to give some quantitative support to that argument and
it has been a pretty consistent argument coming from local government.
Can I though refer you back to the piece of work which is about
to be published from the Department for Communities and Local
Government undertaken by PricwaterhouseCoopers? It is not a deep
piece of work but it does include some metrics in terms of the
balance of a call for information from local government, which
actually comes from central government, as opposed to the needs
of local communities, and I think comes to the conclusion that
80% of all of the information that has been collected is about
central accountability as opposed to local accountability and
then goes on to estimate the cost for a small number of authorities
of responding to the regulatory and inspection regime, and those
figures are pretty substantial.
Q425 Graham Stringer: That is rather
interesting because it is the other side of the argument, is it
not, that if there is going to be an increase in business rates
or a sales tax or some other kind of tax, and nobody likes paying
taxes, that is going to come to be controversial, but if you can
show that central government regimes or a CPA system or whichever
system it is, has a huge cost to it, you can put that against
it? Do you not think it is really very important to try and quantify
that beyond just general percentage information in the system?
Sir Michael Lyons: I would absolutely
agree with that. You just have to appreciate, if you will, that
I am still in mid work rather than finished. I will have to do
some rationing about which things I delve most deeply into but
I think it is a point well made that you might well expect at
the end that I would be able to say something that is rather more
detailed on these issues. Can I develop a point, if you do not
mind, about essentially the point about efficiencies because I
have emphasised throughout the work I have done so far the importance
of seeking both greater efficiency and moderation of the pressures
for more public expenditure, and that leads me even more strongly
to point towards greater local flexibility. I have used the word
(not the only word by any means) "co-production" to
cover a range of issues where, if you work with citizens at a
local level, you can tailor services more carefully to their needs
and get into a debate about what are those things that really
should be coming out of the public purse and which are the things
that should come out of the private purse. It seems to me that
transportation includes some interesting illustrations on that
about how you make decisions on how much is done by foot journeys,
how much is done by bus, how you co-ordinate different transportation
arrangements to improve the efficiency of them coming together,
which are issues that can only be dealt with at a local level.
There is efficiency here that could avoid the need for additional
expenditure; I just want to leave that point with you.
Q426 Graham Stringer: I would like
to follow with a question on city government. I was on the Local
Government Network Commission looking at city-regions and city
government, whatever you want to call it, and we came to the conclusion,
which I suspect is the basis for what you are doing, that you
have to have a step-by-step process; you cannot go back to 1972
or 1974 and restructure the whole of local government. Do you
believe that there is a quid pro quo between passing powers
and resources back to Government and increasing the involvement
of the electorate? If you are going to give extra powers to passenger
transport authorities do they either have to be directly elected
themselves or does there have to be an elected mayor, or would
you, in the middle of that, just allow the voluntary arrangements
that there are currently to be formalised in legislation?
Sir Michael Lyons: I do not think
I have a final position on this but a provisional position might
read as follows, that there certainly is an issue of accountability,
and indeed one of the issues that I am looking at is that if you
were able to separate more clearly those things which are genuinely
local responsibilities from those which are central responsibilities
it is possible to contemplate a more contractual approach between
central and local government for those things which are a matter
of central government's accountability. That only works if you
do not have too much in that box; otherwise we do not move from
where we are. There is an issue generally about improving the
effectiveness of local accountability. My strong suspicion from
the work I have done so far is that that is not going to be evolved
unless it is clearer what is decided at a local level. The electorate
are not hoodwinked. They know that there is limited scope for
a local authority to act within the current framework. Turning
though specifically to your questions about PTEs—
Q427 Graham Stringer: PTAs actually.
Sir Michael Lyons: Sorry, forgive
me: PTAs (and the PTEs that report to them), they are distinctive.
I have worked in Birmingham and for the former West Midlands County
Council. They are distinctive in the metropolitan areas in not
being able to precept—they are levying authorities. That
means that they work much closer with the local authorities and
it seems to me that has got some strengths for accountability
through existing elected arrangements. I am a bit wary about the
idea of introducing new electoral arrangements for city-regions,
especially whilst we have such a woolly idea of what a city-region
is. There is room for debate here but the former metropolitan
counties do not in my mind constitute city-regions. They may be
useful building blocks for sub-regional co-operation but if we
take Birmingham, for instance, the notion that Coventry is part
of Birmingham city-region takes some justifying, not least in
Coventry.
Q428 Mr Goodwill: Following on from
one of Mr Stringer's earlier questions, we have seen a number
of very ambitious transport plans, such as the Leeds super-tram,
but there are other examples in the north west and the south west
which have been not developed but planned at great cost to local
people. Also, I think a lot of people's hopes have been dashed.
Why are these things happening? Is it because local government
is misreading the signals from central government? Is it because
they are listening to local people but they are not able to convince
central government of the need or is it just that the target has
been moved halfway through, because it seems to be happening all
the time and everybody gets very frustrated about it?
Sir Michael Lyons: Again, I think
that I would be a bit cautious about believing that I have got
the whole picture but I can see some components of the problem.
Certainly in part it is about changing regimes of encouragement.
We have had different messages at different times about the extent
to which these schemes would be funded and the balance of funding
that might come from the centre. There is certainly something
about these being run as if they are schemes where they are not
fully costed as schemes that have to be locally financed. We do
not live in a world in which any city starts from the presumption
that it has to find a way of funding the whole scheme and has
a set of freedoms for how it might enter into a contract with
its people and businesses to fund that sort of investment. There
is a sort of uneasy alliance of local ambition and a national
framework for both evaluation and funding which I suspect makes
for a more complicated situation. It is difficult to find where
the villains are in this because it might well be that with a
whole set of people acting with goodwill you still get outcomes
which are less than optimal.
Q429 Mr Goodwill: Do you think it
is symptomatic of any scheme where people have to compete for
funding that there is going to be an awful lot of wasted effort
in participating in a competition where only a few can win?
Sir Michael Lyons: It is a difficult
question to answer, is it not, because undoubtedly at times we
can see that competition has resulted in innovation and creativity,
but if the balance of losers to winners is too large eventually
it discourages people from trying. I cannot give you a yes or
no answer to that, I am afraid.
Q430 Mr Goodwill: On a slightly different
tack, you talked about local accountability. Those of us who live
in areas with two-tier local authorities, three tiers if you count
the regional and parish councils and Europe as well, do you feel
there is an understanding in the population as a whole as to exactly
who makes what decision in terms of transport and how that is
funded or do you think there is widespread confusion?
Sir Michael Lyons: I think all
of the evidence suggests that there is weak understanding about
who is responsible for what. There is a very weak understanding
about the value of the tax pound raised through council tax. That
is one of the things that I have drawn attention to. People feel
they are paying a much larger proportion of the cost of local
services through their council tax than they are in reality, and
there is no doubt at all that multiple tiers do add to this opaqueness.
Also, of course, it is not just about whether or not there are
one, two or three tiers of local government. In part it is because
it is not clear about what is central government's responsibility
and what is local government's responsibility. One of the ambitions
I have, and whether I can measure up to it I do not know, is to
try to offer some lessons about how we might separate more clearly
those things for which Government should properly be accountable
from those things that should be left for local decision-making.
The problem is that it is the bits in the middle which are shared
which are the most complex and that is often the case in two-tier
local government as well. The only point that I would make about
multiple tiers of government is that although the public might
not have a very good understanding of it they may have some very
considerable loyalty to it. I found this during the 1991-96 reorganisation
where people's loyalty to place was very complicated. They could
simultaneously be quite loyal to a small area, sometimes well
captured by district boundaries, and at the same time to their
county. The original view that all you needed to do was go out
and talk to people and you would then be able to draw felt-tip
pens around distinctive communities is always going to be elusive.
Q431 Chairman: The difficulty is
exactly that tension, is it not, in transport, Sir Michael?
Sir Michael Lyons: It is.
Q432 Chairman: What we would like
to know is where you think the boundary should be drawn. For example,
if central government is providing the finance, almost all of
it, for a local scheme because it is a major scheme, should the
department have the right to reject those schemes if there is
something which fits in with the Government's national transport
policy?
Sir Michael Lyons: Again, let
me be careful not to go beyond what I understand but to give you
as fair a response as I can and I base it in part on the experience
of being Chief Executive of Birmingham for seven years. The truth
is you are never going to be able to map the outer perimeter of
the commuting, shopping, pleasure journeys that take place around
the city of Birmingham. They are changing regularly and they are
certainly changing over time. Once you accept that you cannot
map these carefully then on the issue of how you set the boundaries
you accept that you are never going to be able to fix them and
so it is better to look for virtual arrangements which are flexible
but effective. I do not claim for a moment that we have got those.
There were certainly anxieties about how the PTA worked in the
West Midlands but on the other hand it has been around for a while
and has not done a bad job in providing public transport over
that period. If I put that into the context of essentially what
is the responsibility locally and what is it nationally, the trouble
with the current system, I suspect, is that we just see too much
in the box of national responsibility. It does not leave enough
flexibility at a local level.
Q433 Chairman: The difficulty is
that it is still going to be there while you have the money coming
from one source, is it not?
Sir Michael Lyons: I absolutely
accept that and, of course, you go straight to the heart of the
work that I am doing. There the challenge for me, and for those
who would make the case for more local taxation, is that I am
sold on the idea of greater local flexibility. I am clear that
that would be a benefit. I am clear that the public have a woolly
idea of how their local tax is spent and therefore their resistance
to more local taxation, and there is I think a debate still to
be finished about whether, as this all comes out of the pocket
of the taxpayer, it is only because of the way that we behave
that some of it is seen as central government's money and some
of it seen as local government's money. There are potentially
institutional arrangements which would see it as taxpayers' money
and the exact pattern of local and central expenditure would be
negotiated. You do find countries where that works well. I have
not just dropped off the Christmas tree. I know that might be
a difficult proposition to achieve in this country, but at least
it needs to be considered alongside the proposition of more local
taxation.
Q434 Chairman: Are the department
right to accept four shared national priorities for transport?
Sir Michael Lyons: I do not know
that I can give you an answer to that.
Q435 Chairman: You are looking at
balance, are you not, very specifically between local and national?
Sir Michael Lyons: I am.
Q436 Chairman: Their particular priorities
are accessibility, congestion, pollution and safety. You say that
we have to prioritise so which of those should we change? Should
there be a limit on the department's involvement in local transport?
Should it be able to change those priorities?
Sir Michael Lyons: I have not
done the detail of mapping of responsibilities in transportation
yet but let me not avoid giving you an answer. I think the danger
is that in a climate where, through a number of changes, local
government is seen to be very much the agent of centrally established
priorities, those priorities become overwhelming. I think my challenge
to the authors of those four would be, what does it leave for
local determination? What does it leave for Bradford to make decisions
about what is distinctive in Bradford as opposed to what is distinctive
and necessary in Bristol? If the framework does not leave enough
room then I think you end up with what we have got, which is local
government not seeming very powerful to the people that it represents,
the feeling that decisions are taken remotely with arguably rather
less innovation and value for money than you might get from getting
a different balance.
Q437 Chairman: The transport system
in this country and the Government's policy in relation to transport
have always been based on the assumption that you must have modal
shift. The argument is always that to get that you have to have
a policy that is both carrots and sticks. Why do you think decentralised
local government has a better chance of achieving that than centralised
government with all its planning equipment?
Sir Michael Lyons: I think my
case would rest on the success of one of the most centralised
planning systems in the western world. It has not delivered all
that we want to achieve, and I think that is why ministers are
beginning to question whether they themselves might not see that
a different partnership with a different balance of national and
local responsibilities might deliver more forcibly. What I am
interested in is that very often and for different Governments
ministers have found it interesting to go to the United States
for inspiration. Why is it that they go to the United States?
Because it is a federal country and there is experimentation across
the country as a whole, and you can easily disregard the things
that are not working and concentrate on those things that are
working very well and use them as case studies. We do not draw
the secondary lesson from that, that actually more experimentation
in this country might lead to some extra lessons that you could
then disseminate across the country as a whole.
Q438 Graham Stringer: Is the real
driver of that decision that if you are going to decentralise
properly central government has to take its hands off and allow
failure?
Sir Michael Lyons: Yes, it does,
and the consequences of that. It does not mean you cannot put
in place warning systems and arrangements which tell you when
something is going off the rails—and it might be literally
in this case.
Q439 Chairman: What worries some
of us about the concept of city-regions is the idea that within
that structure smaller areas might easily find their interests
particularly difficult to achieve. You have made it very clear
that you think it is the flexibility of the response to the local
population that is important but do you not see that there might
be the same tensions between a large city in a city-region and
the smaller areas around it that there are in effect between central
government and local government at the present time?
Sir Michael Lyons: Oh, for sure,
but those tensions exist anyway, do they not? In seven years in
Birmingham I was constantly being upbraided by the members representing
individual wards about why it was that we were continuing to concentrate
investment in the city centre and not doing exactly the same thing
in Balsall Heath or Small Heath. Those tensions exist inevitably
and that is why this is a political process rather than a technical
process of making those public choice decisions in an open way
and a way that you can explain to the people that elected you
to do them. All I am saying is that that is the reality and it
does not need me to argue that you have to have new structures,
as long as you have elected representatives who can explain why
those decisions were reached.
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