8: Local Government Finance Flashcards
How do local authorities spend money?
Capital spending: concerns big building projects such as new schools or housing estates
-Revenue spending: concerns day to day running costs of these projects after they have been built (salaries, utility bills)
Capital= Long term building costs
Revenue= Short term running costs
Where does the money for revenue come from?
-Government grants:
General government grans: a sum of money that the government gives to local authorities and then the local politicians decide what to spend it on (the revenue support grant)
Specific government grants: called passport grants. Money passed to local authorities that may only be spent on specific things. The ministers in London decide where this will be spent (the dedicated schools grant)
-Council tax income
-Council house rental income
-Other fees and charges
-Business rates: property taxes on commercial property (national non-domestic rates)
-75% comes from central government grants
-25% comes from Council Tax
-Deprived areas with poorer housing stock raise less in council tax and rely more on government grants.
What did the 2010 Coalition Government change about government grants?
Previous Labour government increased number of passported grants to spend in thing seen fit by govt.
2010 Coalition changed the trend by delivering more unpassported grants so local authorities can spend as they see fit.
Grants have been cut by 40% or more.
What are passport grants?
Specific government grants given to local authorities to be spent on specific things like the dedicated schools grant. ministers in London decide where the money will be spent.
How are business rates collected?
Accordign to its ‘rateable value’ (what rent would be)
-not based on business profits (controversial)
-they used to be collected locally but pooled in central government and redistributed by Westminter politicians.
-Coalition government decided to ‘repatriate’ Business Rates so local authorities get to keep them in their patch- about half is retained by local authority.
-They are calculated using a multiplier known as the uniform business rate.
What is the council tax?
-A property tax with a personal element
-Household are taxed according to a notional value last calculated in 1991
-Household are put into one of eight bands -A-H- depending on notional value and charged accordinly
-Cheap to administer and collect and hard to avoid
-collected by billing authority
-Precepting authorities can claim some of the money collected
-Central gov can control how much local authorities get by capping increases
-People livinng alone ge discount. Students are exempt.
What is Adult social care precept
Cuts to local authority grants and ageing population created a crisis in adult social care according to Local Government Association.
-Government introduced an Adult social care percept on council tax to help pay for the service in 2015.
-If they propose an increase of more than 5% they must get backing of residents in a referendum.
Where does the money for capital spending come from?
Capital grantd from central government (city challenge money)
-Capital records: money raised through sales of council assets
-Prudential borrowing: councils can borrow money according to limits set by central government
-Private Finance Initiative and Public-Private Partnerships- private companies provide capital investment and this is paid back by local authority over years. capital spending does not appear on local authority’s balance sheet. Controversial as council can end up paying much more over the years.
