Is the cyst occurring in the supra caudal scent glands (on the surface of the tail about a third way down from root of tail - hair is usually discoloured, sparser and coarser depending on breed)? Some dogs seem to be prone to cysts and they can be difficult to remove permanently without full GA. Small warty type cysts can be drained by squeezing if not too painful to the dog but then the pocket that the cyst grows in remains. Dogs with itchy skins and dander/scurf/dandruff often appear more prone to cysts.
If there is a head on the cyst and the contents can be squeezed out and a topical antibiotic applied for a period of time this might hold a warty type cyst at bay.
Docking would the the last option of choice. If the cyst is large and perhaps repeatedly blocking the supra caudal glands I think that one would need to feel assured that the Veterinarian is competent and his/her experience gives sufficient confidence that amputation is the right decision. If so then very unfortunately it may be the option to take. Otherwise seek second opinions. It also needs reassurance that the lump is a cyst and not a cancerous lump. If the latter the only realistic option would be to amputate the tail above the affected area.