Lyons Inquiry - Final Report

Final Report

The Inquiry's final report was published on 21 March 2007, on the same day as the Chancellor's annual budget statement. In an accompanying Press Notice Sir Michael announced that his short term recommendations included:

• greater flexibility for local authorities to place-shape with less control from the centre - by reducing specific and ring fenced grants, a new power to levy a supplementary business rate in consultation with business, and a new power to charge for domestic waste to help manage pressures on council tax, and an end to capping of council tax;
• changes to improve fairness of council tax, recognising that council tax benefit is a rebate, automating the system to ensure 1.8billion pounds in unclaimed benefit helps the poorest households, and raising the savings limit for pensioners to 50,000 pounds;
• improving transparency in the funding system by being clear about the contribution made by national taxation, and ensuring a more independent voice to inform Parliament and the public; and
• improving incentives for local authorities to promote economic prosperity and growth, initially through reform of the Local Authority Business Growth Incentives Scheme.

In the medium term, he advised that the Government should:

• revalue council tax to update the tax base and improve fairness;
• at the same time, reform council tax by adding new bands to reduce bills for those in the lowest value properties, paid for by increased bills for those in higher value properties paying more - there should be no increase in average council tax bills as a result of this;
• consider assigning a fixed proportion of income tax to local government;
• find ways to improve the incentives within the grant system; and
• consider introducing the power to levy a tourist tax if local government makes a strong case based on local public support - this would be appropriate only in some areas.

In the longer term, Sir Michael said that future governments could consider more radical reform options such as local income tax or re-localisation of the business rate, but these reforms may require greater public support and understanding than currently exists.