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FEATURES - FUNDING REVUE

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After all the fanfare, it seems the balance of funding review has been nothing but an entertaining diversion ...
After all the fanfare, it seems the balance of funding review has been nothing but an entertaining diversion

Well, what a cop out. What a glorious, copper-bottomed, gold-plated, fur-lined, belt-and-braces cop out. We all got it wrong. It was never intended to be the balance of funding review. It was the balance of funding revue. It was a review to decide what to have a review about. It was a pre-review.

There we were, waiting for deputy prime minister John Prescott to step down from Mount Sinai holding the tablets of stone. And what happens? Up pops local government minister Nick Raynsford telling us the prophet has been delayed. But in the meantime, Institute of Local Government Studies director Sir Michael Lyons will entertain the audience - no doubt interspersed with periods of community hymn singing.

At every mention of local government finance over the past year, the government has whetted our appetite for the review. I do not recall Mr Raynsford or Mr Prescott saying: 'Hold on chaps, don't get too excited. This isn't going to lead to any decisions, it's just a short list.'

If the sole purpose of the nine meetings and 15 months' work had been to refine the options, the minister could have saved himself a lot of time.

Why not have a chat with his officials, or invite Tony Travers, director of the London School of Economics' Greater London Group, and local government finance consultant Rita Hale for a cup of tea?

We know that revaluation is scheduled to apply from 2007. You do not have to be Einstein to realise that revaluation without rebanding would make the charge of the Light Brigade look like a model of strategic withdrawal. Nor does it take extraordinary insight to realise such rebanding would have to be based on greater differentiation at the bottom end of the scale, and the capture of inflated values at the top.

Finally, it flows from both of these that a council tax based on rebanded and revalued properties could sharply widen the gap in the tax base between councils depending on the mix of their housing stock.

The government has already poured scorn on a Liberal Democrat-style local income tax, although Mr Raynsford has been careful to keep assigned income tax in play as a possible ancillary element in council funding. He had a happy time in the Commons explaining just how unappetising the local income tax option was.

Equally it was pretty certain the government would not provoke a pre-election bust-up with the business community by proposing the return to councils of business rates. So we did not have to see the review to know the government favourite was a 'modernised' council tax.

Given that knowledge, it is hardly surprising that some creative arithmetic around the levies for higher rated houses - courtesy of the New Policy Institute - gave the media a weekend of shock-horror council tax stories. These are not the headlines Labour wants in a week it unveils strategies for everything from the future of the armed forces to the promotion of ethnic knitting.

In fact, the government has opted for the retention of council tax as the central pillar of local government finance, a decision which will be easier to sell if it succeeds in getting a wider take-up of the benefit system. The Lyons inquiry is not a blue-sky exercise: it is about reforming council tax. The problem is that the balance of funding review will not have done much for the balance of funding unless it comes down on the side of either relocalised business rates, some form of local income tax, or both.

The political and electoral contexts are important. The new school funding arrangements announced by education secretary Charles Clarke already represent another tightening of central control. This hasn't been a great start to the consultation on local government's future. On top of that Mr Raynsford was in the Commons, 24 hours before the statement on the funding review, to impose capping orders on the handful of councils forced to rebill after sneaking over the government's limits.

The battle of next year's council tax bills has already started, with the government issuing threats about the need for restraint and councils warning about dire consequences for services.

Sir Michael will report at the end of 2005, which is safely past the expected date of the next general election. The Conservatives may heave a sigh of relief and the Liberals will conjure up all sorts of horrible imaginings about what is intended.

The government will hunker down. Good man that Sir Michael; particularly sound in the long grass.

David Curry MP

Shadow secretary for local and devolved government

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