The government has done its best to put the Lyons inquiry into local taxation back in its cage. But former government adviser Paul Hackett thinks that a more courageous local government reform agenda could save Labour from meltdown in next month鈥檚 local elections

It was hoped by many Labour councillors that the long-awaited Lyons inquiry into local taxation and the funding of local services would mark a sea change in the government鈥檚 fractious relationship with local government. Labour activists were hoping that the Lyons Report might reignite a public debate about the future of local government and kick-start the party鈥檚 campaign for the May local elections.

As it turned out, the 390-page report, Place-shaping: a shared ambition for the future of local government, was a bit of a damp squib and attracted little media interest. This was hardly surprising as the report was completely over-shadowed by the chancellor鈥檚 March Budget which was published on the same day. Moreover, government ministers were quick to kick most of the report鈥檚 proposals into the long grass. Even before shadow local government secretary Caroline Spelman had issued her press release protesting that the Lyons Report was 鈥淏rown鈥檚 town hall tax bombshell on working families and pensioners across the country鈥, Labour had made it clear that there would be no changes to council tax, no revaluation or changes to the council tax banding structure, no new tourist tax, and continued use of capping powers 鈥渢o protect taxpayers鈥.

The government did agree to Sir Michael Lyons鈥 recommendations to remove the current relief for most types of empty property from business rates and to 鈥渃onsider the options鈥 for a supplementary business rate and other local charges. These announcements hint at a more permissive future role for local government in local economic development under a Brown administration, but hardly get the political blood pumping ahead of the local elections.

The political no-go area

The problem is that reform of local taxation has become a no-go area for Labour and the Tories, even though the survey evidence suggests that more local taxation for local services strengthens local democracy. Ever since the Thatcher debacle over the Poll Tax, Labour has been wary of the political backlash that may ensue from a major rebalancing of local and national tax and spend policy. You may end up with a fairer and more progressive decentralised system with clearer accountability, but there is no cross-party consensus on how to get there and a lot of problems on the way. As local government minister Phil Woolas put it in his response to the Lyons Report: 鈥淣o tax will ever win a popularity contest.鈥

Lyons suggests that the lack of interest and public trust in local government is partly because people don鈥檛 like the council tax (which according to the Lyons Report survey is perceived as unfair and not representing value for money) and partly because local councillors have become disempowered. Although the Lyons Report makes the case that the devolution of powers and responsibilities to the sub-national level can have economic benefits and that local authorities should be drivers of the new joined-up place-making agenda, it also comments that there is a lack of public confidence in local government and a cynicism about councillors making much of a difference.

Lyons does show that local institutions are more trusted than national institutions and that more people trust their local councillor (42%) than trust government ministers (22%), but he admits he is worried about the reputation of local government. Minister Ruth Kelly has expressed similar concerns about the capability of councillors and recently launched a commission, led by Dame Jane Roberts, the former leader of Camden council, to review how local democracy can be revitalised. For many in local government the problem is rooted more in the adversarial relationship with central government, rather than with councillors themselves. Wherever the balance lies, the government doesn鈥檛 trust local government enough to remove the threat of capping.


Sir Michael Lyons: his report supported the devolution of powers to the sub-national level while recognising a lack of public confidence in local government
Sir Michael Lyons: his report supported the devolution of powers to the sub-national level while recognising a lack of public confidence in local government


By keeping council tax rises down to their lowest level in 10 years (4.3% on average per home, still above inflation but a lot less than in the pre-capping days) and holding back on major financial reforms that might be perceived to hurt the pockets of voters, the government has taken much of the heat out of the forthcoming election battle. The local elections in England are in danger of becoming a non-event, with media attention focused on Scotland where Labour is falling badly behind the SNP, and in Wales where there is talk of a Tory-led rainbow coalition (see box).

The problem is that reform of local taxation is a no-go area for Labour and the Tories

It is hard now to imagine that just over a year ago the government was flirting with plans to cancel the 2007 local elections because of the sweeping impact it considered its local government reforms would have on councils across the country. In the end the local government reform agenda (new unitary authorities, multi-area agreements and shared services) has hardly touched the public consciousness.

Yet, the local elections in England鈥檚 312 local authorities are politically important 鈥 not least for Cameron鈥檚 Tories who are desperate to build on their success at last year鈥檚 local polls when they gained 316 seats and a net gain of 11 councils. Labour lost 18 councils and 319 seats E E last time and can ill afford to suffer the same again. The Liberal Democrats made little headway in 2006, but, like the Tories, will want to show that the tide is turning against Labour. The catch-22 for Labour is that another heavy defeat in the local elections makes it much harder to move ahead with the sort of local government reform agenda many of their activists want to see. It is those local activists that Labour needs at the next general election.

What鈥檚 at stake

Across England, 25 unitary authorities and 150 district authorities will have all their seats up for election. Another 36 metropolitan boroughs, 20 unitary authorities and 81 district councils will re-elect a third of their seats. There will also be mayoral elections in Mansfield, Middlesbrough and Bedford. More than 100 of those councils with elections are under no overall control and many could change hands on just a few votes.

The Tories will want to capitalise on Cameron鈥檚 strong showing in the opinion polls and turn the local elections into a vote of no confidence in Labour. They will be looking to shore up their traditional vote in the shire districts and make headway in the larger towns and cities in the Midlands. Cameron has Birmingham in his sights, as well as Brighton and Hove, Bournemouth and other towns along the south coast.

Labour has seen its local support slip away over recent years and now has the lowest number of councillors since the early 1970s. But it still has a strong base in the metropolitan boroughs, especially in the northern cities. However, the list of metropolitan councils with no overall control gets longer, including Bolton, Bradford, Bury, Doncaster, Kirklees, Leeds, North Tyneside, Rochdale, St Helens and Wirral. Labour鈥檚 efforts to protect its local base in England will be difficult given the demands on the party in Scotland and Wales. Blair鈥檚 parting shot could be on the back of a triple poll defeat.

The Liberal Democrats, meanwhile, are not expected to improve their overall position very much, although they are hoping to retake Sheffield, Kingston-upon-Hull and Bath. They will also want to improve their position in Bristol and Milton Keynes. The Greens could provide the biggest surprise on the back of growing public interest in the eco-agenda, although they are starting from a very low base.

Overall, the May elections are likely to see more gains for the Tories and Liberal Democrats, with Labour losing seats 鈥 although perhaps fewer councils than expected owing to the split in seats that are up for election and a low turnout in urban areas. A bad night for Labour will nevertheless be a warning to an incoming Brown administration and may even encourage him to brave the long grass in search of Lyons.