Examination of Witnesses (Questions 580-599)
SIR MICHAEL
LYONS AND
MS SALLY
BURLINGTON
19 JUNE 2006
Q580 Mr Olner: I would be interested
to pursue that a little further because, as you know, I was a
leader of a council many moons ago. The ambition and the stuffing
was knocked out of a lot of us because of the overbearing regulation
from central government. It did not matter what ambitions and
what assets you had. You were told by central government that
you could not use them. Having set on getting that leadership
level and ambition back in, what do we need to be saying in our
report for government to back off, to make sure that that leadership
and ambition comes around again?
Sir Michael Lyons: To be credible
the message, whether it is from your Committee or from me, has
to simultaneously acknowledge that there is a national gain to
be achieved from more local choice, taking place-shaping at a
local level seriously. It also has to acknowledge that that requires
local government to change. If you do not put those two things
together, it is a rather difficult message to convince people
of. How does it have to change? Not by positing something of which
we have no experience, but instead saying let us take the very
best examples where local government is at its very best. If you
could make that practice more widespread, that would be an exceedingly
good improvement on where we are. It is extraordinary, is it not,
that very often when government determines by national initiative
what it uses as a national initiative is something that was pioneered
and developed within local government? It appears attractive and
is then rolled out. That is fine but there is a danger that you
reduce the ability for councils to respond to their local circumstances
and to innovate, if you spend too much time directing from the
centre.
Q581 Mr Olner: Is there any disengagement
with local authorities, regions, city regions, shire counties
or what-have-you with the other public services: fire and rescue,
the police and all of those? Where do they fit in the game plan
of what happens to local authorities?
Sir Michael Lyons: I cannot give
you solutions because these are really problematic areas. Nowhere
is that better reflected than in the arguments for and against
the reorganisation of the police service, where you have a clear
argument from the Home Secretary that the changed world that we
live in of greater threat from international terrorism requires
bigger units of policing and the ability to invest in those parts
of the police service which are best developed at a regional and
national level. Simultaneously, there is an acknowledgement that
most police services in this country have made extraordinary progress
in recent years in connecting up at a local level through crime
and disorder partnerships to deal with antisocial behaviour. We
know, because the Audit Commission's recent study very clearly
demonstrates, that what our citizens value is being sure that
the police service, along with other services, is going to tackle
what happens on the door step. They are interested in the big
ticket crimes but they are also very interested in antisocial
behaviour problems that happen around them. There is the challenge.
Do you organise the police at the level of the occupational command
unit or do you organise the police at the level of the regional
structure? The truth is you are going to have to make sure that
it works at both levels. You have some choices about how you try
to do that. For me, the most important thing is that public services
work well together.
Q582 Martin Horwood: Can I address
the same issues as Bill but from the other angle of the spectrum,
which is that of trying to persuade high calibre candidates to
stand as local councillors in the first place? I am sure every
Member of this Committee has very high calibre local councillors
in their particular areas, he says carefully, but we all know
I am sure that it is desperately difficult to persuade people
to take on what is a very burdensome role that is probably going
to be done in their spare time and probably destroys their social
life and does not help their family life. It is one for which
they get a reward that has become more generous over recent years
but it is still nothing like they would command in a really high
calibre job. It is very difficult to persuade high calibre people
to take this kind of burden on. Some of the things you talk about
seem to offer something of a solution, particularly more support
from officials in much the same way as we have publicly funded
support from our researchers, or from local community councils.
Some of them seem to go in the opposite direction. The idea of
single member wards I have to say, as a former local councillor
myself, strikes fear into my heart. If you were the only person
responsible for taking on casework in a particular ward, that
would make it even worse surely?
Sir Michael Lyons: You have two
choices. Either you concentrate on the core remits, and all the
thoughts that occur to you as you travel towards conclusions you
leave out because they are not fully researched and fully fledged;
or you include them to give more colour and also to encourage
debate on these issues. Then you find that you are including things
which you have not been able to research and reach a final position
on. I am quite clear about the suggestion which came out of the
Young Foundation, that it was at least worth reflecting upon.
If it is the case that the public find it easier to identify with
the single individual that represents them—that is part
of the argument for those who favour elected mayors—you
could extend that to single person wards where it is clear that
this person speaks for this area and that is a case that is at
least worth thinking about. I put that to one side because I would
not say that I am a champion of that. I was interested and it
came up simultaneously with my work. I am much more interested
in the drift of your main comments. My report very firmly comes
to the conclusion that the whole body of elected members of a
council is an important instrument of engagement with the community.
I think that was not given the attention it should have been given
in the 2000 Act which established executive models of management
and far too frequently councillors felt dispossessed. That was
a term that was used in front of the select committee at that
time. Although the legislation speaks about local leadership,
it was not thought through how that would be delivered and supported.
I agree with you. In far too many areas local engagement is seen
as only part of the political process. Councils take a step back
from it and do not engage with it as fully as they might. Indeed,
when they do, they are sometimes criticised by their elected members
for fear that this is encroaching upon their territory, so it
is quite a difficult area to negotiate. I am clear that the body
of councils in this country, whilst it includes some outstanding
examples of both engagement and local leadership, is not entirely
representative of the community. Far too many parts of our community
do not see it as part of their life plan to spend some time on
the council. That could all do with being changed. You will see
that I come to some conclusions. The parties themselves might
look at them.
Q583 Martin Horwood: You seem to
be presenting it as a matter of choice but, for some people who
simply could not afford to take on that kind of role because of
their family responsibilities or taking a cut in income, it is
not really so much of a choice unless you provide the support
amongst the other options. Talking about whether or not it is
part of somebody's life plan, I smiled when you suggested that
the political parties need to leave more time from political activities.
It would be nice if local councillors had some time for local
activities sometimes. It might be more about the support you provide
for them once they become councillors.
Sir Michael Lyons: I agree.
Q584 Martin Horwood: Can I move to
local taxation? As a Lib Dem I am happy to trot out the advantages
of local income tax. One of the ways in which I have done that
in the past has been saying that it could be collected nationally
if one of the advantages is you would be able to abolish other
forms of collecting taxation and do it on a universal basis. I
am sure that may be true of other forms of taxation as well. You
seem to be opening the door to a kind of pick and mix approach
to local taxes which would be presumably, I would have thought,
quite costly and quite confusing in some of the economies where
all of us might suggest a different form of taxation might be
lost. Is that not right?
Sir Michael Lyons: If I have left
you with that impression, I am not sure that is the one I wanted
to leave you with. I am clear that there is discussion still to
be had—and that is where my work will be completed in December—about
the original remit that I was given: can we make council tax fairer?
Does local government need creative flexibility to raise more
money locally? Implicit in that is the debate about the balance
of funding. That also includes the possibility that there might
be some taxes for which there is local choice. That is part of
the remit. I do not think it extends to some areas having local
income tax and some having council tax. We are talking about some
smaller taxes over which there might be some local choice. What
might they be? I seem to have a problem getting this over to the
press. I have made no decisions but you might give freedom to
authorities to make their own choices about whether in some way
tourists make a contribution to the local tax base. You might
give councils the opportunity to reflect on a wider charging regime
as an alternative to some aspects of taxation. This is part of
the equation but it is certainly not where some choose local income
tax and others choose council tax.
Q585 Martin Horwood: You are clearly
trying to extract yourself from the controversy of the bed tax
but whatever local taxes they might choose are you suggesting
that all local authorities would have that power or are you suggesting
the two tier approach where those with the most strategic responsibility
would have the right to do it but others would not?
Sir Michael Lyons: You are asking
me to look into the future and decide which set of taxes I think
are a good idea and then think about the spatial implications.
That is all for later in the exercise. All I am acknowledging
is—and indeed the original remit acknowledged—that
there might be some—and these would be by and large taxes
that would generate small sums—choice for authorities, not
that there would be choice about their general tax base.
Q586 Martin Horwood: Would it apply
to all or not?
Sir Michael Lyons: It is probably
best that I do not stretch my imagination. At the moment, that
is something I am looking at.
Q587 Alison Seabeck: Do you feel
constrained by the fact that you have to consider a revised council
tax? We cannot do away with council tax; that is accepted. Is
this a personal view or an official view?
Sir Michael Lyons: On this particular
subject, both of them come together. I am still looking at council
tax. I was clear in my December report that it has many merits.
We raise over £20 billion each year from council tax. It
is a very efficient tax to collect. It relates to the locality
so people understand that is the tax they are paying. They do
not understand very well the value they are getting for their
council tax. They think that it pays for a much higher proportion
of local services than it does and I think that is problematic.
Council tax has a lot to commend it but it is also true that it
is the most perceived tax. More people recognise council tax than
any other council tax in the country, even though it is a relatively
small tax compared certainly with income tax and VAT. I need to
consider that very carefully when I finally come to a conclusion
in my recommendations about the future of council tax.
Q588 Alison Seabeck: You are not
entirely wedded necessarily to council tax?
Sir Michael Lyons: I am continuing
to explore that but I can see that it has many strengths. One
would be cautious about positing its replacement.
Q589 Mr Betts: This is about fairness
and the ability to pay related to a property tax. Most people
might think it is based on how it relates to their income but
there can be people with very different income levels housed in
the same property value or the same council tax level. How do
you square that circle? That seems to be one of the fundamental
arguments around it: it is very difficult to collect and there
are lots of merits but is it fair?
Sir Michael Lyons: You are right.
There are those who question council tax because of what they
see as a mismatch between tax paid and ability to pay. It is certainly
a dilemma. Council tax in its design was quite skilful as a tax
that had a property base but it is not a pure property tax. It
does have discounts which relate to the number of people living
in the house and it also has council tax benefit which mean that
it is related to income. What our work has shown is that if you
had the full take-up of council tax benefits this would correct
the regressivity of the tax at the lower end. My conclusion as
of December was that if you were interested in fairness solely
in terms of proportion of income paid in council tax, you would
be most interested in getting the council tax benefit system to
work so that people who were eligible took advantage of it. However,
I was clear then and I am clear now that that is not the only
dimension of fairness. If you have two households living next
door to each other, one of whom has considerable wealth tied up
in the house that they own, there might be an argument for taking
account of wealth in terms of relative contributions. That is
another aspect of fairness but these are complicated issues.
Mr Betts: Are you also looking at the
issue of the various bands of council tax and whether there should
be changes at the top and bottom to make the relationship between
the property value and payments more in line? Secondly, I wonder
whether you are looking at another issue which has been highlighted.
A lot of the publicity is given to pensioners and council tax
but, if you look at it, some of the real problems can be with
people who are working, on fairly low incomes, sometimes with
families, where the problem is that the income level at which
they start to pay council tax—in other words, they start
to lose their total entitlement to council tax benefit—is
much lower than the level at which they would start to pay income
tax. Should we look at some realignment of those? That might address
another problem for people on low incomes.
Q590 Chair: It is perfectly reasonable
with a property tax to say that property is wealth and therefore
ought to be taxed, but the council tax does not recognise the
difference between a tenant of a property that is owned by someone
else or an owner occupier.
Sir Michael Lyons: I absolutely
agree with that. Can I start with Mr Betts's point about low income
households? I certainly do not argue that the only issues of fairness
relate to the elderly. There are issues around those who are asset
rich and income poor and there are issues around those who are
tenants, living in highly rated properties even though they have
no interest. These are issues which I am sensitive to and hope
to explore further before I make my recommendations in December.
To come to the issue of bands, we did a very substantial amount
of work before the summer of last year on modelling different
band arrangements, both increases in bands, the introduction of
regional bands and the possible role that a special band for London
might play. Those were all published in the December report so
that it would be clear what the implications of those were. It
is not impossible but it is difficult to imagine fundamental changes
in the band without simultaneous revaluation of properties. As
you know, government has decided not to pursue that, whereas when
I started my work I expected that to be taking place in 2007.
What my work had demonstrated is that even with the addition of
extra bands, and quite substantial stretching of the shoulders
between the bands, this had nothing like the impacts on fairness
against income which many people had posited. In fact, it had
no significant improvement, if that is the right term, on the
proportion of income paid on council tax. That is partly because
the mixture of home ownership by income is much more varied than
you might immediately think, and we are back to where people are
in their life cycle. You have people who bought houses when they
had much larger incomes and are still living in those houses.
In short, I have not finished work on this, I still have the job
of offering an answer as to whether you can make council tax fairer,
and if so, how. All of the points which you have raised in those
three questions are part of the agenda for that discussion.
Q591 Mr Olner: Can you perhaps share
your view with us about how the business rate supplements the
other strands of income into local authorities? Do you think it
should go back to how it was, ie localising and set by the local
authorities?
Sir Michael Lyons: I have not
reached a final conclusion on that. It is one of the things I
was asked to look at, and I have been actively engaged with the
business community as well as local government and other stakeholders
in that discussion.
Q592 Mr Olner: Is it possible to
share business's views with us?
Sir Michael Lyons: Business views
are variegated. At the level of headline there is a unanimity
of view of all of the biggest organisations; the CBI and the British
Chambers of Commerce are clear that they like the uniform business
way. They like it for the reason that it is predictable, it is
linked to the RPI, and I would posit that if any of us were in
a position to have our tax linked to the RPI we would like it
too. Why would they say otherwise? When I get into a deeper more
detailed discussion, particularly at a local level, in interesting
places like Sheffield and Surrey, but not alone, you will find
the business community saying, "Of course we do not want
to pay any more tax, who would, but we do have some concerns about
current arrangements. We would like to see closer connectivity
with the local business views and the council. We recognise that
there are some important issues of infrastructure and other investments
in which the business community might properly make a contribution.
We like the principle of business improvement districts and foresee
that might be built on because it is voluntary in nature".
I draw out of that debate that whilst there is an understandable
preference for the status quo, there is recognition that the business
community has an interest in the debate, has an interest in getting
closer to local government, and would like to see its issues more
strongly reflected on local governments' agenda.
Q593 Chairman: We have been jumping
around quite a lot, but can I bring up the issue of the Local
Government White Paper which, as you know, has been delayed and
is now likely to be published, we believe, in the autumn. How
does the work of your inquiry dovetail into that revised timetable
on the publication of the Local Government White Paper?
Sir Michael Lyons: It is not a
major problem for me, I have my remit. When the remit was extended
last summer, I agreed publicly—and at that point David Miliband
was the relevant minister and made it clear that he expected to
publish a White Paper—that I would put my thoughts into
the public arena in advance of the White Paper so that those who
were supporting him could draw on that. That is what I did, and
that is why I published the May paper. Originally I anticipated
that there might be three or four thematic papers, but when it
came to putting them together I realised that this was such a
complicated story that unless I tried to tell it in one go the
different dimensions would be weakened, so instead of three thematic
papers there is a rather fuller attempt to cast a picture of a
different type of future in the May report. It is entirely a matter
for the Secretary of State to decide when she is ready to publish
her paper. This exists and I continue to be open to dialogue.
Indeed, although this is an independent inquiry we work closely
with government departments and there is a dialogue which continues.
Q594 Alison Seabeck: Will the delay
in the White Paper and your final views on local government finance
not impact on the next copy of the Spending Review in terms that
the Chancellor, whoever he or she may be at that time, will not
be able to make decisions with a clear basis in terms of local
government finance because if there are changes to come it could
skew that, could it not?
Sir Michael Lyons: I have always
been clear that all of this is funnelling into the next Spending
Review. That was the basis on which my remit was given to me and
why we agreed at that point that December of this year is the
right landing spot for me.
Q595 Alison Seabeck: It cannot afford
to slip much more, can it?
Sir Michael Lyons: I have not
decided yet what I am going to recommend, so it is a bit difficult
for me to know how long that could wait. What I am clear about
is that some of the more radical options for change could have
quite long lead times to them. My general feeling is that there
is a need to give more space for local choice, to provide greater
incentivisation for local government to recognise the role of
place shaping and try and develop a finance system which supports
that. That might mean quite a range of changes, some of which
would take a little longer to implement than others, but you can
move towards a different future by being clear about the package
of changes that you want to make, even if you cannot make them
all in one go. I am less anxious about what is included in a particular
White Paper, or even a particular piece of legislation, than the
government of the day evolving a coherent view about the job that
it wants local government to do in the future and the best way
to work to develop that.
Q596 Alison Seabeck: If there is
coherence incremental changes could work?
Sir Michael Lyons: I am sure,
but I do not think there is any alternative and there is no golden
key to this, I have said that on many occasions, it is not a single
tax change. This is about, points which we have talked about today,
building up confidence in local government so that it is more
assertive on behalf of its communities, that it gets better at
listening to and working and engaging with communities. All of
these things need to be dealt with together, so inevitably the
drum will beat at a different rate for different changes.
Q597 Mr Olner: You mentioned earlier
that revaluation could have some effect on what your eventual
report will say at the end of the day. Do you think it was the
right decision to defer revaluation?
Sir Michael Lyons: At this stage
it is always best not to look backwards, is it not? Was it the
right decision? I am on record saying that I would not have recommended
that the Government backed off on revaluation. If you are going
to have a property tax, I think it should be revalued frequently.
Whilst council tax is a hybrid, it has got a property base and
therefore there is everything to be said for it being revalued
very regularly. The technology is at hand, we can do this, so
there is no reason to stop it. It is difficult, I absolutely understand
the Government's dilemma. When you have not revalued for 12 years,
it takes some courage to make the revaluation. There are winners
and losers and, not surprisingly, as we know of old, it is only
the losers who knock on your door, the winners sit back quietly
and if they think of you at all it is only in their prayers.
Q598 Mr Olner: Going back to the
old rating system, it was based on the rentable value of the property
and, of course, council tax was brought in because poll tax quite
rightly failed so miserably. If you are talking about property
values, there is a vast range of property values up and down the
country, how does valuation affect them? Is it something which
has to be taken into account? Do we look for an average valuation
because there there would be winners and losers for sure?
Sir Michael Lyons: It would take
me more time than you have got this afternoon to take you through
the process of revaluing. Let me say, we have all the skills and
VOA has prepared itself for revaluation. It is not a task that,
though complex, is beyond us. Indeed, there are other places in
the world which have now moved to annual revaluations and it can
be dealt with. Of course, the more frequently we revalue the smaller
the number of properties at any point in time that are affected.
The good policy will take you towards more frequent revaluation
because after all it only changes if relative house prices change.
It does not matter if your house prices goes up, it is only if
it goes up at a lesser or faster rate than others that you start
to change your position. This is a technical debate rather than
the Government has decided what it wants to do, I am clear that
it has made that decision and it is not for negotiation.
Q599 Mr Betts: Still with the costing,
I am sure you have very full and enthusiastic co-operation from
the whole of local government. I do not know whether sometimes
you get a slight hint of cynicism from people who say, "We
have seen it all before. We have got a history of inquiries into
local government and local government finance and nothing much
has happened. We have got political parties that are always more
enthusiastic for radical change when they are in opposition than
when they are in government. You are on your third minister now
overseeing the inquiry and who you report to and, at the end of
the day, are we going to have a situation where the Government
is going to be committing some radical change, because it seems
like there is a mood for some radical change?" Do you sometimes
feel that you might have wasted a couple of years of your life!
Sir Michael Lyons: How sweet of
you. That remains to be seen and, indeed, there might be a bit
of speculation about which particular years I have wasted! Let
me assure you, I do have other things to do. I only took this
task on because I was convinced that ministers were interested
in finding answers to the questions. The challenge for me is can
I come up with answers which are sufficiently persuasive for them
to adopt those recommendations. I have already been clear, and,
indeed, some of my earliest communications with ministers made
it very clear, that we have to change public understanding about
the role of local government and the taxation basis as a precursor
to be able to make changes. In a world in which most taxpayers
seriously think their council tax pays for 75% of local services,
when, in fact, they pay for 25% for local services on average,
it is a pretty serious misunderstanding. That led to the extension
of the remit and the debate which we are involved in at the moment.
I have said publicly that I think we are approaching a tipping
point in terms of the national debate about the balance between
the local and the centre. It is not the perogative of any one
party or any one government. Where do I look for evidence that
might be a good idea? Well, virtually anywhere else in the world.
We are one of the most centralised countries in the world amongst
developed economies, and that suggests to me that we might have
some benefit in moving towards a new balance with more local choice
and local discussion.
Chairman: On that more optimistic point
we will end. I am sure we do not feel that you have wasted two
years of your life. As a Committee we will certainly be hoping
that there is real change following the White Paper and your report.
Thank you very much.
| 
