Lessons learned from Layfield
and Lyons
14. In 1974, the government of the day appointed
Frank Layfield QC to chair an inquiry into local government finance.
Although Layfield's recommendations were not accepted, his report,
published in 1976, remains relevant, its arguments still framing
much of the debate today. Several witnesses referred to it in
evidence to our inquiry, and Sir Michael Lyons, in the executive
summary of his own report into local government completed some
30 years later, observed that "I follow firmly in the footsteps
of Sir Frank Layfield."[8]
15. The enduring influence of the Layfield Report
stems from its comprehensive nature, and specifically from the
manner in which it placed financial reform within the wider context
of the relationship between local and central government. The
Layfield Committee postulated two models for local government:
the "centralist" model, under which central government
would have the main responsibility for local government expenditure;
and the "localist" model, under which local authorities
would have the main responsibility for the level and pattern of
expenditure on local services. It advised the then Government
to choose between the two models, and to develop a system of local
government finance that would support the chosen model, with the
balance between central funding and locally raised funding reflecting
where the main power and responsibility lay.
16. As Professor George Jones and Professor John
Stewart, Emiritus Professor of Local Government and Administration,
The Institute of Local Government Studies, University of Birmingham,
who both served on the Layfield Committee, explained in their
evidence to our inquiry, the Committee made clear its preference
for a localist solution, and concluded, therefore, that local
authorities "should be able to control local expenditure
and local taxation, and to be accountable for those spending and
taxing decisions"[9]
because "a decentralised model of governance could not be
sustained if central government grant was the predominant source
of local government's revenue".[10]
Accordingly, the Layfield Committee made recommendations to the
Government, in 1976, to devolve powers to local government, including
taxation. Significantly, the then Government opted for a "middle
way" which in practice confirmed much of the centralist status
quo and did not involve any major changes to the financing arrangements
for local government, effectively rejecting Layfield's localist
ideas.
17. The Lyons Report is the other key reference
document for our inquiry. In July 2004, the Government appointed
Sir Michael Lyons to re-examine the local government finance system.
In September 2005 his remit was extended to consider the strategic
role of local government. The long-awaited Lyons Report, Place-shaping:
a shared ambition for the future of local government, was
published in March 2007. The recommendations made in the report
are a result of three years of work, with extensive consultation,
and are backed up by a 400-page report.
18. Sir Michael Lyons coined the phrase "place-shaping"
to describe what he saw as the core role of local government in
the 21st century. In contrast to the more traditional
focus on the role of local government as a provider of specific
services, he promoted "a wider, strategic role for local
government," which he termed 'place-shaping'—"the
creative use of powers and influence to promote the well-being
of a community and its citizens".[11]
He saw two benefits arising from local government taking on this
'place-shaping' role. First, it would enable decisions to be tailored
to the needs of local areas, leading to an enhanced service to
the public. Second, it would enable local people to have a greater
say in decisions that directly affect their lives.
19. Despite reaching similar "localist"
conclusions, Sir Michael Lyons' tone was more cautious than Frank
Layfield, particular with regard to financial reform. Sir Michael
Lyons advocated a "developmental approach", suggesting
that "as short-term reforms take effect, the Government should
consider building on them to further increase local flexibility
and choice and consider longer term and more radical reforms to
the funding system".[12]
This difference probably reflects in part the negative government
reaction to the more radical Layfield report: Sir Michael Lyons
was, it appears, playing close attention to the art of the possible.
It is also because, whilst Sir Michel Lyons placed a similar emphasis
on freeing local authorities' ability to spend money according
to its own priorities, he placed less emphasis on local authorities
raising a greater proportion of their finance locally. As Sir
Michael Lyons himself explained to us during oral evidence:
[…] I thought the preoccupation with local government
having freedom to raise more money was a distraction from the
most urgent presenting problem, in my judgement, and that—and
I did not change this view over the life of the work I did—was
actually the flexibility to use the money that it had […]
the last thing that local government needed was the ability to
raise more money that it did not have the freedom to explain how
it was going to spend. It is a question of the sequence of these
things. Yes, the balance of funding comes on to the agenda but
not before the issue of flexibility.[13]
Yet, notwithstanding Sir Michael Lyons' caution,
within hours of the Lyons Report's publication the Government
issued a press release rejecting Sir Michael Lyons' recommendations
to remove capping and for a revaluation of domestic properties
for council tax, and has not responded formally to his other recommendations.
20. A number of the written submissions we received
were critical of the Government's handling of the Lyons report.
Sunderland City Council, for example, observed that the manner
in which the Government had rejected some of its recommendations
(e.g. abolition of capping) and shelved others (e.g. council tax
banding reform) "does not bode well for the future";[14]
the Association of North East Councils commented that "it
is disappointing that there has been so little action on Lyons'
recommendations (except to reject the abolition of capping) and
we believe that the Government should now set a timetable for
considering them."[15]
When we pressed the Secretary of State for Communities and Local
Government, Rt Hon Hazel Blears MP on this point during oral evidence,
she confirmed that the Government had no intention of responding
formally to Lyons.[16]
It appears, therefore, that the Lyons report will share the fate
of its predecessor; to be more influential with academics and
with local government than with the government that commissioned
it.
21. We have drawn two key lessons from the Layfield
and Lyons Reports. First, these last two government-commissioned
investigations have both recommended shifting the balance of power
between central and local government in favour of the latter.
The evidence submitted to our inquiry has led us to the same conclusion.
Second, the government response to both reports serves to highlight
enduring government resistance to a radical enfranchisement of
local government. In each case, the government's response appears
to us to be a missed opportunity to benefit from a more substantial
move towards greater local autonomy.
The situation today
22. Table 1 below illustrates the series of local
government reforms which the government has introduced a over
the last decade, creating a new framework for the interaction
between central and local government.
