Policywatch

Sir Michael Lyons is expected this year to propose to ministers a major "rebalancing" of the often tetchy relationship between Whitehall and town hall. Although his inquiry is not due to make its final recommendations until December, a discussion paper published in May provides clues on the report's direction. Indications are that the inquiry is moving towards proposing a significant increase in the scope of influence and decision-making of local authorities in England.

The role of local authorities is pivotal. With enhanced influence and local flexibility to pursue local economic and environmental policy objectives, the developer/town hall relationship will become even more important.

The town hall role of facilitator of local regeneration is frustrated, according to the Lyons inquiry's discussion paper, because local authorities "do not currently have enough powers and tools at their disposal to enable them to make a real difference to local prosperity". Judging from the views submitted to the inquiry, a consensus appears to be emerging that the move to centralisation of power needs to be redressed. The question remains on what scale.

A separate government initiative may hinder moves to free the town hall from Whitehall control. The introduction of a planning gain supplement may contradict the inquiry's drive towards greater decentralisation. PGS will complement scaled-back Section 106 agreements and the local authorities will be required to seek "recycled" PGS revenue from the Treasury.

PGS aside, perhaps the most significant aspect of the momentum for reform of local authority powers is a sea change in policy-makers' views of the role of the local authority as a driver of the local economy. Lyons argues that this role supports the national economy and should not be viewed in isolation from the performance of the national economy. Businesses will admit that relationships with local authorities have much improved and moved away from the often adversarial relationships evident in the 1980s that led directly to the nationalisation of the business rate by then prime minister, Margaret Thatcher. Greater control over local taxation would arguably improve the ability of councils to initiate strategic regeneration projects.

Whitehall has already cautiously enhanced some local financial powers: the prudent borrowing regime (allowing local authorities to seek loans using their asset holdings as collateral), Business Improvement Districts and Local Authority Business Growth Incentives were all legislated for by the Local Government Act 2003. The inquiry looks set to expand on these powers.

For instance, the discussion paper notes how it is desirable for local authorities to become leaders in improving local environmental sustainability behaviour. This could be in pursuit of particular policy goals - for example, encouraging green behaviour in a similar manner to that pioneered by Braintree council, where council tax relief is given for property energy conservation improvements. Lyons has focused on planning-led improvements, but with wider powers to offer tax incentives, local authorities would, arguably, be in a strong position to influence property developers to supply greener buildings.

Opportunities and dangers of a new super housing agency

Local authorities do not have enough powers and tools to enable them to make a real difference to local prosperity

The Lyons inquiry

The cross-cutting review of the department's delivery agencies for housing and regeneration expects to report to the DCLG working group in July. The review is looking at how the planning structure has evolved and how best the two main government bodies in regeneration and affordable housing can deliver.

English Partnerships specialises in acquiring the land assets and carrying through remediation work for housing, whereas the Housing Corporation focuses on ensuring funding and control over the practices of the social housing sector in the context of mixed communities. Yet these distinctions have blurred of late with much crossover work in delivery.

There are rumours that the consultation is a prelude to a merger between the two bodies. Although EP is the smaller of the two, it is expected to become the dominant partner. If it does happen, what can developers expect?

On the positive side, there are examples of where the two institutions have worked to good effect. Milton Keynes is one of the government's growth areas where EP has taken an overarching role forward funding infrastructure and developing relationships across all sectors to facilitate delivery. EP and the corporation have jointly established The Housing Partnership to deliver affordable and key worker homes in a range of former new towns.

If we look closer, EP has a model for developing affordable housing that uses the ideas and finance of private developers to deliver outcomes. EP helps supply new homes in London with the London-Wide Initiative. According to EP the LWI will "create a step change in the supply of affordable homes in the capital". With its commercial partners, EP aims to deliver over the next five years up to 4500 mixed-tenure homes, of which up to 2000 will be affordable homes for sale.

This structure is interesting in its adaptable interpretation of what constitutes affordable housing. Currently, affordable housing in planning constitutes purely social housing for rent in perpetuity. The LWI shows how a more flexible approach can deliver greater numbers of subsidised homes to meet society's needs and how private developers can bring new innovative thinking in this field. If these ideas are built upon, the review could lead to a more developer-friendly agency and an improved delivery system.