Local gov finance

Question 1

What is Revenue Expenditure?

Answer 1

• Short term expenditure on council buildings & staff
• Anything that lasts a year or less such as running costs, heating, lighting, salaries
• It is funded by both central & local gov

Question 2

Local gov sources of funding

Answer 2

• Council tax
• Rents, fees & charges
• Balances & reserves

Question 3

Central gov sources of funding

Answer 3

• Business rates

- Gov revenue grants

Question 4

Council Tax

Answer 4

• Domestic property tax
• Paid by the occupier of the property
• Properties valued and put into bands (A-H)
• Occupier can appeal against the band
• Each council decides how much it requires from council tax
• If more than 2 adults live in the property, the bills are same as for 2
• Funds 25% of revenue expenditure
• 50% property tax 50% personal tax

Question 5

Sources of funding

Answer 5

• Rent
• Burials
• Car parking/fines
• Recreation/leisure
• Library fines

Question 6

Council Tax Exemptions/Reductions

Answer 6

• Reduction for those with disabilities
• Second/holiday home discount
• Unoccupied dwelling discount
• Full-time students, student nurses or mentally impaired are exempt from council tax
• Single-occupant discount
• Council tax support

Question 7

How Council tax works

Answer 7

• One bill is sent to each property (there are billing and precasting authorities)
• There are limits on the charges & if a council wants to increase their charges about 2% then they must hold a local referendum.

Question 8

Advantages

Answer 8

• Easy to understand
• Predictable yield
• Easy to budget
• Cheap to collect & administer
• Difficult to evade payment

Question 9

Disadvantages

Answer 9

• Can be disincentive to home improvement
• Small proportion of electorate pay
• Favours occupiers of expensive properties
• Lower yield than a personal tax
• Crude property valuations

Question 10

Uniform Business Rates

Answer 10

• Companies pay national business rates
• The charge is collected by the billing authorities
• 2020 allows English councils to retain all the business rates income
• It is local tax, the rate is set by the gov
• Raises up to £25bn for councils in England

Question 11

Central Gov grants

Answer 11

• Revenue support gramts
• General block grants
• Formula grants
  (Relative needs formula, funding based on demographics)
  (Relative resources amount, relative affluence of local population)
• Non-formula grants
  (Local services support grant)
  (Ring-fenced grants, direct to Schools & public health grants)
  (Unfenced grants)

Question 12

What is capital expenditure?

Answer 12

• Spending on long-term, durable assets
• Anything that will last for more than a year
• This includes roads, houses, schools, plants & equipment

Question 13

Sources of funding

Answer 13

• EU
• Borrowing
• Gov capital grants
• Capital receipts
• Revenue sources
• Private public partnerships
• National lottery

Question 14

Local Referendum

Answer 14

• Central gov may demand one if it deems a council tax rise to be excessive
• Local authorities with responsibility for social care must hold one if increase is above 4%
• PCC must hold referendum if increase is more than £10 on a Band D property
• Fire & Rescue authorities must hold referendum if increase is above 2%

Question 15

Charging, Billing & Precepts

Answer 15

• Gov can cap council tax rates
• One bill per household
• Local authority decides amount to charge
• Councils send out bills to households & collects proceeds

Question 16

Precepting authorities

Answer 16

• Unitaries = police & crime commissioners, fire authorities
• Minor = parish/town councils
• Major = county district, unitary councils
• Issues billing bodies with a precept for a share of council tax