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The government's prevarication over the balance of funding review has become oddly predictable ...
The government's prevarication over the balance of funding review has become oddly predictable

'Council tax may be doubled.' This was the alarming scenario raised by ITV's Tonight with Trevor McDonald programme earlier this month.

I hold no candle for such a sensationalist and unbalanced piece of tabloid television populism, but it illustrates the folly of the government's position on local government finance.

Ministers may think it clever to kick reform of local taxation into the political long grass, by following their 15-month balance of funding review with an 18-month independent inquiry, chaired by Audit Commission deputy chair Sir Michael Lyons. By pure coincidence, this avoids making any decisions until after the expected date for a general election. However, as continuing media attention shows, this issue will not go away. Indeed, it will pick up steam next spring.

Opposition parties will feed off public discontent and anxiety over the regressive nature of the council tax and the increasing burden loaded onto it. The government will look indecisive and dissembling. 'Wait for Sir Michael's report,' will not be an adequate answer, eight years into government, when the issue is raised in the general election campaign. Indeed, procrastination on this vital issue could inflict political damage on the Labour Party.

There is no justification for this delay; it is sheer political cowardice. The balance of funding review involved many important stakeholders. It took a wealth of evidence. Where necessary, it commissioned its own research. It identified the problems that need to be addressed. We have now been officially informed that council tax must be made fairer and that the imbalance of 75/25 between central and local funding needs to change. This may be done through relocalising the business rate, or introducing a local income tax, or through a combination of these and other options.

The deliberations of the review itself and the evidence it received from academics, the local government fraternity, business and other stakeholders provide a range of options for achieving these aims. All that is now required are political decisions on future strategy and an action plan for implementation. I understand why the government is making use of Sir Michael's expertise in coming to these decisions, but I am sure he could arrive at recommendations in three months rather than 15.

We are told that Sir Michael will take further evidence from stakeholders. For what purpose other than to justify the leisurely timetable? How will the evidence differ to that painstakingly provided by stakeholders to the balance of funding review?

There has been open-ended consultation after open-ended consultation on this issue, starting with the green paper Improving local financial accountability, in 1998. The same problems have been repeatedly identified, without decisions being taken. This is in marked contrast with other political decisions taken without any consultation at all, such as on education funding. The government can move quickly when it wants to.

Any shelving of responsibility on local government finance reform will thrust councils into the firing line in the run up to the general election. The Local Government Association has identified a£1bn gap in funding for 2005-06 and without further largesse from the chancellor there will be the familiar vicious circle of planned council tax rises above inflation, bellicose ministerial threats of capping and cuts in services not protected by ring-fencing. The publicity surrounding these events will expose the government's 'masterly inactivity'.

The proposed delay also risks major political difficulties beyond the general election. If the Lyons review reports at the end of 2005 with recommendations for radical reform, there will have to be a period of government consideration before legislation is framed and taken through Parliament. I doubt whether this

could be achieved before the end of 2006. If it then meant the council tax system was not reformed before revaluation is due to take effect in 2007, millions of council taxpayers would suffer huge increases as a result of differential house price inflation. Tonight's alarmist speculation would then be close to the mark. Political meltdown would follow.

Hopefully, the government's Groundhog Day response to the balance of funding review will be seen as a false start that can be revisited in the autumn. There is no reason why the Lyons review cannot produce recommendations within a few months, allowing the government to indicate before the general election its intentions on this vexed subject. No one has accused ministers of rushing into decisions and risking a mistake of poll tax proportions; and if yet more consultation is required it could be conducted expeditiously through focus groups or by personal invitation.

If the government persists with its present timetable, however, it should be made a new test of the central/local partnership. The LGA should co-ordinate support from across the local government family to persuade the government of its error and to move reform back to a sensible timetable.

Dennis Reed

Chief executive, Local Government Information Unit

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