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Yet another finance review?

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Behind the ubiquitous “welcome” given to last week’s announcement by ministers that there is to be a fresh review of local government finance, lurked a few knowing smiles.

Creditable attempts to review the thorny subject in 2004 and 2007, by then local government minister Nick Raynsford and Sir Michael Lyons respectively, could not force change, so why would this one be different, they ask.

A valid question, certainly. But those of a more optimistic disposition have inverted the argument: with so much of the groundwork covered by previous inquiries, whoever picks up the baton this time will be able to reach swift conclusions, they say.

Whoever is chosen - and Sir Michael, now chair of the BBC Trust, will be in no hurry to return for a second go -they will certainly have a rich amount of source material.

Central conclusions of the Lyons inquiry included: retaining council tax, with a possible revaluation; dropping capping; leaving business rates centrally set but with the introduction of a small, locally determined add-on; and, in the longer term, allowing councils to retain part of the growth in their tax income base.

Mr Raynsford’s balance of funding review concluded that reform of council tax was needed and this would be supplemented by either relocalising business rates, introducing a local income tax, or by a combination of the two.

Chartered Institute of Public Finance & Accountancy chief executive Steve Freer was one of many voices calling for any further review to take on board the Lyons’ inquiry findings.

And, echoing Sir Michael, Mr Freer was keen to emphasise that incremental, rather than radical, change is required in the first instance (see below).

With a leaked Department for Communities & Local Government memo reportedly suggesting councils could be facing cuts of 40%, now is arguably the ideal time for such a review.

It remains to be seen whether the necessary cuts turn out to be that extreme, but whatever the final

figure - and it will be substantial - there is a strong argument that changing the central-local balance of funding is vital.

As Lord Bichard, an executive director at the Institute for Government and a key player in the Total Place programme, told LGC this week, “we cannot make the savings we need to make by carrying on in the same old way”.

A tough job awaits whoever takes on what could potentially be a poisoned chalice.

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