Last edited 18 Nov 2016

Lyons Inquiry

The Lyons Inquiry into Local Government was established in July 2004 following the Balance of Funding Review (BoF). Sir Michael Lyons was appointed jointly by the Chancellor of the Exchequer and the Deputy Prime Minister to analyse the ways in which local councils are funded and how the system might be improved. He was originally asked to report by December 2005, but the remit of the Inquiry was extended and the report Place-shaping: a shared ambition for the future of local government was not published until 21 March 2007.

Lyons inquiry executive summary front cover.jpg

Sir Michael Lyons summarised that the main responsibilities of local government as:

  • Providing safe and secure places to live.
  • Considering the challenges of globalisation and fostering success locally.
  • Understanding the impact on the environment.
  • Increasing and maintaining trust levels and satisfaction within the local community.

He then identified a number of important challenges:

  • A lack of flexibility regarding resources.
  • A general lack of understanding of the financial system.
  • Confusion when it comes to accountability.
  • Poor incentives.

The report itself focussed on:

  • The significant issues that affected funding for local government.
  • How council taxes could be reformed.
  • Alternative sources of funding.
  • Financing elected regional assemblies.

According to Sir Michael, central government should:

  • Clarify responsibilities.
  • Streamline the performance framework.
  • Establish an accountable funding system.
  • Develop more financial flexibility.
  • Ensure increased efficiency and choice.
  • Generate economic prosperity.
  • Strengthen leadership and direction.
  • Build confidence with communities.
  • Enhance public engagement.

The recommendations of the report included:

  • Reducing central government control.
  • Enabling more flexibility for local decision making.
  • Retaining the council tax as a local tax.
  • Renaming and reforming Council Tax Benefits (CTB) as the Council Tax Rebate (CTR).
  • Supplementing council taxes.
  • Dividing key responsibilities between local and central government.
  • Abolishing central governments capping powers.
  • Including the percentage of central government funding of local services on council tax bills.
  • Re-evaluating council tax bands and making them more progressive.

The report also promoted the concept of ‘place-shaping’ within local government which it described as, ‘the creative use of powers and influence to promote the general well-being of a community and its citizens’. It suggested that this includes a number of components:

  • Building and shaping local identity.
  • Representing the community.
  • Regulating harmful and disruptive behaviours.
  • Maintaining the cohesiveness of the community and supporting debate within it, ensuring smaller voices are heard.
  • Helping to resolve disagreements.
  • Working to make the local economy more successful while being sensitive to pressures on the environment.
  • Understanding local needs and preferences and making sure that the right services are provided to local people.
  • Working with other bodies to respond to complex challenges such as natural disasters and other emergencies.

Sir Michael said, "Local government's place-shaping role - using powers and influence creatively to promote the well-being of a community and its citizens - is crucial to help improve satisfaction and prosperity through greater local choice and flexibility… I call for a new partnership between central and local government. This needs to be based on changes in behaviours from all tiers of government to achieve a stronger relationship - creating a shared ambition for the future. Central government needs to leave more room for local discretion and recognise the value of local choice; while local government needs to strengthen its own confidence and capability, engage more effectively with local people, make best use of existing powers, and stop asking for central direction.”

Other reports published by Sir Michael include:

  • Lyons Inquiry into Local Government: Interim Report and Consultation Paper, 2004.
  • National prosperity, local choice and civic engagement: a new partnership between central and local government for the 21st century, 2004.
  • Well Placed to Deliver - Shaping the Pattern of Government Service, 2004
  • Towards Better Management of Public Sector Assets - A Report to the Chancellor of the Exchequer, 2004.
  • The Lyons Housing Review, Mobilising across the nation to build the homes our children need, 2014.

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