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Government welcomes Lyons report

Published	21 March 2007

The Government today welcomed the publication of Sir Michael Lyons' final report of his Inquiry into Local Government saying that his core proposals support and extend the commitments Government has already made to strengthen local government's role and help it deliver better public services and build sustainable communities.

Responding to the report Local Government Minister Phil Woolas agreed with Sir Michael that council tax was not broken, saying that it is the increases in council tax rather than the tax itself that are the real cause for concern. He pledged Government's continued support to local authorities to improve accessibility of council tax benefit. He also confirmed the Government's continuing commitment to use capping powers to protect taxpayers from excessive increases.

Phil Woolas also emphasised that the Government has no plans for revaluation or changing the current council tax banding structure during the life of this Parliament. Any decision beyond that would be a matter for the next Parliament.

In addition the Minister confirmed that the Government would legislate as soon as possible to remove the current business rate relief for most empty properties and consider Sir Michael's proposals for a local supplementary business rate.

Local Government Minister Phil Woolas said:

"First and foremost, I want to thank Sir Michael for the commitment and energy he has demonstrated throughout the life of his Inquiry and the thorough and dedicated way he has approached his brief. He has led a major debate into the role of local government and produced a comprehensive and clear report of his findings.

"Sir Michael has said that there is no magic bullet or simple solution to local government funding. We agree. We also support his conclusions that the council tax is not broken. Of course no tax will ever win a popularity contest, yet council tax collection rates - at 96.8 per cent - are at their highest level ever. We have provided ten successive years of above inflation grant increases to local authorities, and are ensuring that low income households receive council tax benefit. We have also used our capping powers to protect the tax payer from excessive increases. We will examine the work that the Inquiry has undertaken on longer term alternatives to council tax.

Council Tax Benefit

"We will consider carefully what Sir Michael says about reducing the impact of council tax on pensioners in particular through improvements to the way the interface with the benefits system works. The Government agrees that local authorities can do much more to encourage the take-up of council tax benefit and wants to work with local government to deliver further improvements in this measure. We will consider the wider proposals on council tax benefit in the light of practicalities and affordability alongside priorities for the tax and benefit system as a whole.

Council Tax Capping

"The Government does not consider that its powers to cap council tax increases necessarily need to be seen as weakening the freedom and accountability of local government to its electorate. We only use capping powers to protect taxpayers from excessive increases and will continue to do so when increases are excessively high.

Council Tax Revaluation and Council Tax Banding

"Sir Michael has various proposals for improving the council tax, including revaluation. The evidence in the Inquiry shows that a revaluation would not have a significant impact on the fairness of council tax relative to income. It would, however, cause significant disruption for individuals and families. The Government will therefore stand by its commitment not to revalue during the lifetime of this Parliament. Indeed with the forthcoming three-year settlement for local government concluding in 2010-11, it would not expect to consider revaluation before this date. Even at this point there would need to be clear benefits given the costs to households that could be involved.

"Sir Michael makes proposals for changes to the system of council tax bands at the time of any revaluation. Changes to the structure of council tax would not be feasible without a revaluation, and would by themselves cause significant disruption and cost. We therefore have no plans to change the current banding structure of council tax - the present system will remain for the foreseeable future an acceptable basis for local authorities to raise locally a proportion of their resources.

Individual Capital Values

"Sir Michael has not recommended, and we have no plans - despite what the tabloids might say - to move to a system based on individual capital values rather than bands. So it is wrong to suggest that Northern Ireland is a testing bed for England.

Business Rates

"We agree that business rates are a successful and stable property tax, and that there is no case at this time for changing the current RPI cap on annual increases in the national rate of tax. However we accept the case for improving some aspects of the regime.

Empty Property Rate Relief

"In particular Sir Michael has endorsed Kate Barker's conclusion that the current system of providing relief for empty property from business rates is not justified and should be amended. UK office rents are amongst the highest in the world while more than 10 per cent of property in the City of London is currently empty. We believe that reductions in this relief could help encourage more efficient use of, and a readier supply of, property and lower rents for businesses who rent their accommodation, as well as removing unjustified imbalances and distortions.

"The Government will therefore legislate as soon as possible to remove the current relief for most types of empty property after a period of three months, or six months in the case of industrial property and warehouses. In so doing we will pay careful consideration to the implications of such changes for classes of empty property which receive special treatment within the current system of empty property relief and would not improve property supply. We are also confirming that we will exempt empty property held by charities from a business rate charge.

Other Rate Reliefs/Exemptions

"As Sir Michael proposes we will consider the merits of extending rates to include derelict and vacant previously developed land, and assess other reliefs and exemptions to business rates. However we have no plans to change the existing relief given to charities, which will not form part of this assessment.

Local Supplementary Business Rates

"We also intend to consider Sir Michael's proposals for a local supplementary business rate and these proposals will form the basis of a consultation in due course. We agree that a local supplementary rate could provide welcome flexibility for local communities to raise additional resources to invest in themselves and strengthen their local economies, and we will consider what the best options may be, working closely with business, local government and other stakeholders, and ensuring that local businesses have a proper say in the development of plans for a supplement by local communities.

Tourist taxes

"Sir Michael examines the case for a tourist tax. He concludes that there is not a strong evidence base for the introduction of such a tax. While he puts the case for a consultation on this issue, we are not, therefore, inclined to focus on this area. The Government does not intend to introduce a tourism tax.

Independent Grants Commission

"Sir Michael rightly emphasises the importance of transparency and clarity in the funding of local government. But we do not agree that an Independent Grants Commission would be the right approach. Difficult decisions on funding choices should be made by directly elected politicians."

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