Local government finance Flashcards
What sources do local authorities receive funding from?
The largest source of income is business rates and council tax for local authorities.
Other sources include government grants, , fees and charges.
The local authority saving money can mean cuts to services and jobs.
What is capping
Margaret Thatcher introduced capping which gave central government the power to limit the level of tax a local authority could increase by.
What is a ring fenced grant?
A ring fence tax is a grant from central government to a local authority which tells them how and where to spend their money. Labour have reduced the amount of them considerably in recent years.
What is a general grant?
The coalition government moved back from ring fenced grants to general grants to give councils more freedom on where to spend their money.
Tell me all you know about central government cuts:
Deprived areas get 75% of their funding from central government in comparison to richer areas which get 75%.
This is why it can be more devastating for some areas when there is government funding cuts.
Government plans to cut the deficit under ‘austerity’ had a large effect on councils between 2010-2019- with real terms effects of around 27%
In recent years, central government have reversed the trend of ring fenced grants to give local authorities more say in where they spend their money.
Name 5 topical issues in relation to central government funding cuts.
Covid pandemic, cent gov asked to inject more money to make up for shortfall
Concern about cuts, especially with the demand for investment in health and school transport, school places and adult social care.
Where does the councils money go- what is revenue expenditure?
Revenue expenditure is
the money councils spend on
day-to-day running costs .
It makes up the majority of
spending – and includes things
such as wages, repair and
maintenance, heating,
payments to suppliers,
stationery, materials, fuel etc.
Traditionally, 70% of revenue
funding has come from central
government.
What is capital expenditure?
the rest of local authority spending goes
on this – large-scale building
and refurbishment projects
which can cost millions.
Capital programmes usually run
over 3-5 years, things like new
schools, roads, facilities have to
be planned for and money
borrowed to finance the projects
– which may take years to
repay.
-money has to be raised
separately to the revenue
budget
What is council spending?
A council plans their budgets months before they know how much they will get from central government.
They make funding decisions
based on what they expect to
receive, the income they can
generate and how to use any
reserves to fund spending or cut
council tax.
A council’s planned spending after
deducting these amounts is known
as its budget requirement.
The difference between this and the
final settlement from government
determines by how much council
tax has to rise.
What is the budget cycle?
In late January/ Febuary- after the consultation, the final local government finance settlement is approved by the house of commons
In Feb/March- council’s final spending decisions are approved and council tax is set.
April 1st- start of financial year and timetable for decision making
July- early indications come in, government sets out spending reviews, stating priorities and target for public services
In early Dec, councils
learn how much they
can expect from central
Govt when the
provisional local
government finance
settlement is
announced.
What are cons of council tax?
-valuations are out of date, based on property value at 1991
- can favour occupants of expensive properties
-occupation of property is not a good indicator of ability to pay
Who and what properties are except from council tax?
Apprentices, full time students, student nurses, patients in long term care, severely mentally impaired and monks and nuns
Student houses, properties which are unfurnished on empty for more than 6 months of because the owner is in care home ect.
Who collects the tax?
The billing authorities collect the tax on behalf of the council.
