Magazine article Public Finance

From Layfield to Lyons

Magazine article Public Finance

From Layfield to Lyons

Article excerpt

It is natural to look at the Lyons report through the perspective of the Layfield report, which covered similar ground more than 30 years ago. The Layfield committee, of which we were members, completed its task in under two years, whereas the Lyons Report has taken almost three, not because of any delay by Sir Michael Lyons, but because of extensions to his remit.

The Lyons review itself was a stage in the review of local government finance, that in turn followed the government's Balance of Funding Review. The whole process has taken almost five years - a product of procrastination by the government rather than lack of diligence by those undertaking the reviews.

The main impact of the Layfield report was not so much on the governments of the day, but on informed opinion. Lyons acknowledges this effect in his report, which opens with the choice Layfield posed between an approach based on local accountability and one based on central accountability. Lyons returns to this at the end of his report, quoting Layfield: 'I do believe that many of the decisions of government can and should be taken in different places, by people of diverse experience, associations, background and political persuasion.'

Circumstances have changed since Layfield. The council tax has replaced domestic rates by way of the poll tax. Capping has been introduced. Business rates have become a national tax.

Both Conservative and Labour governments centralised controls, and other forms of intervention have proliferated. Authorities have had to devote ever more attention to an endless flow of regulations, targets, performance measures, guidance, different inspectorates and requirements set out in the variety of specific grants. The requirements of central government have been more important than the requirements of its citizens.

The Lyons report is based on two main principles, which are similar to those of the Layfield committee. Lyons argues that the system of local government finance should follow the desired role and functions of local government. That finance should follow function was a principle guiding Layfield, hence the importance attached to the choice between local and central accountability.

Lyons elaborates a concept of the role of local government as 'place-shaping', to sustain the wellbeing of the local community, arguing that that role is needed in a complex and changing society. The report makes an authoritative case for local government in modern society, emphasising the contribution councils can make to the efficient allocation of resources, matching allocation to needs and preferences that vary from place to place.

Lyons also complains about the use of the phrase 'postcode lotteries' in debates on local government, as if it is bad that local people make different decisions on the best use of resources in their own local circumstances. He calls on central and local government to expose this empty argument.

The second principle underlying the Lyons report, as it did the Layfield report, is the importance of clear public accountability in supporting the role of local government. For Layfield, the main problem faced was confusion over where responsibility lay for decisions on local government finance. Lyons also sees this as a major problem because of lack of public understanding, complexity of funding and the poorly understood link between business and local services. Precepts, capping, detailed controls, and specific grants add to the confusion. Further problems of accountability underlie the complex patterns of community governance, with little public understanding of the variety of agencies and partnerships, and how, if at all, they can be held accountable.

The Lyons analysis is devastating. It shows the need for clear accountability, greater flexibility, better incentives for local government, overcoming unfairness and securing the benefits of a better allocation of resources. This requires change in both central and local government. …

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