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Cutting the purse strings

The Lyons inquiry will recommend that local government be given more budgetary control to make sure the money goes where it's really needed.

GORDON BROWN'S and David Cameron's bombast and bluster over the chancellor's 2p cut in income tax last week overshadowed a set of recommendations in the Budget far more likely to boost the quality of life in the UK.

Nestling deep within the 2007 Budget's 320-page report was the government's acceptance of proposals designed to give local authorities greater exibility in the way they operate and allocate spending.

Former audit commissioner Sir Michael Lyons's inquiry into local government, published a few hours before the Budget last Wednesday, was the culmination of a two-and-a-half-year scrutiny of how councils are run.

His conclusion was that compared with the rest of the western world, local government is left with little room for manoeuvre by Westminster.

The majority of money spent by councils in the UK comes from central government grants (see graph), a large proportion of which is ring-fenced for specic purposes.

'With less exibility the pressure on council tax increases and local authorities have nowhere to go to balance their books other than council tax payers, ' Lyons told NCE.

'The ideal scenario would be that local government raised more of its monies and had good and strong relationships with local communities and business communities.' Lyons proposes a range of measures to achieve this and the government has agreed to move them forward in this autumn's Comprehensive Spending Review.

The first proposal is that government reduces the amount of local authority funding that is ring-fenced, giving councils more freedom to spend money in areas where the council feels it is needed, rather than where Westminster tells them to spend it.

For example, a local authority may be one of the many identi d recently by the Asphalt Industry Alliance as suffering a severe shortfall in road maintenance funds. It may also have a surplus in education funding, but the highly prescriptive terms of the grant prevent this being redirected into repairing potholes.

Another important proposal is that authorities are allowed to introduce a supplementary tax on local businesses. This could kick-start a wave of new transport infrastructure, which is hanging in the balance due to a lack of funding (see news). Lyons sees a supplementary business rate as part of a package that would give communities an incentive to invest.

Once money had gone to a speci project, Lyons says that some of the tax income on the economic growth the investment generated should be handed back from central government to the council, which could again be invested in the community. In an ideal world, Lyons sees this as forming a perfect continuous circle, constantly pushing up the economic wellbeing of an area.

Transport 2000 director Stephen Joseph says that this would move the UK a step closer to what he regards as the superior public transport in mainland Europe. 'Finance for British cities, with the exception of London, is the most centralised anywhere in Europe, ' he says.

'In France they have the employer's payroll tax, which is activated by a statement of community interest. As a result there is lot of good urban public transport. In Germany there's a petrol tax supplement to nance the local area's public transport.' Meanwhile, Lyons sees the introduction of variable charging for waste collection services as a vital tool for enabling councils to wrestle back further control over their affairs.

'It gives communities the power to charge with the express intention of avoiding nes [for missing landll reduction targets] further down the line, ' says Lyons.

Lyons also backs the ndings of the Barker review of planning and the Eddington transport study, and calls for the re-regulation of bus services outside of London.

'I see the recommendations in this report very much as not just for the government, but for future governments, ' he says.

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