Headlines: December 5th, 2006



Local authority leaders have called for big changes in the way local government is financed and for the setting up of an independent public finance commission that would take the politics out of tax. In a submission to the Lyons Inquiry, the Local Government Association proposes that the commission, which it has called OFTAX, should oversee and ensure sustainable finances for local councils.

The paper says the Commission could be set up on the same lines as the Financial Services Authority after the Bank of England was made independent in 1997. It would give independent evidence, evaluation and advice on key issues to central and local government and would not be involved in political decisions.

Its brief would be to steward overall funding regimes, including running distribution and equalisation mechanisms; it would ensure tax base valuations and other data were up to date; regulate a devolved system fees and charges and investigate new and alternative charging regimes. It would also provide the regulatory framework for returning business rates to local control and offer research and advice.

In addition to the proposed Commission, the LGA report details other measures it believes would improve the management of local government funding. The Chairman of the LGA, Sandy Bruce-Lockhart, said the document offered a way of keeping the tax out of politics and might mean the end of large council tax rises. “Councils are striving for an ever better deal for the taxpayer and OFTAX would be a way of helping to achieve this.”

He said local people as well as councils were tired of watching the annual wrangle over how much money central government would give to authorities and how much council tax would have to be paid. “If Ministers embraced these common sense proposals, it would allow local people the freedom to know that decisions on how services were paid for would be made in their best interests,” he added. Many of the failings of the current system could, he said, be blamed on political short-termism, confusion and a failure of will to reform a structure that was decades out of date.