Monies that a business spends6/13/2023 While in aggregate local authorities have received more than enough central government money to cover all Covid lost income and higher costs, there is large variation between them. The effects of Covid have not been experienced equally by all local authorities. This is because central government grants were cut and these grants made up a larger share of income for local authorities in areas of higher deprivation (many of which are metropolitan districts or London authorities). Metropolitan districts – primarily local authorities in cities – and London local authorities have borne the biggest reductions in spending power since 2010. But the size of the cut since 2010 has varied across different types of local authorities. How have changes affected different types of local authority?Īll local authorities have had to find ways to do more with less in the face of cuts to their spending power. However, after 2015, the government ceased to incentivise council tax freezes and then started to allow councils to increase local tax rates more rapidly – above the 2% threshold – in order to raise additional revenue for local services. This meant that local authorities were compensated with higher grants for several years. In some years, these grants were a ‘one-off’ – local authorities were given additional money for a single year – whereas in others they were permanently ‘rolled in’ to central government grants to local authorities. In effect, councils who froze council taxes did not lose revenues. Boris Johnson’s government reduced it to 2% for 2020//22.īetween 20, the coalition government encouraged councils to freeze council tax rates by offering them higher grants if they did so. Theresa May’s government increased this threshold to 3% for 2018//20. Local authorities raised 25% more council tax, in real terms, in 2019/20 compared to 2009/10.įollowing changes made in the 2011 Localism Act, local authorities have not been able to raise council tax rates by more than 2% annually without holding a referendum since 2012/13. While grants from central government were cut, rates of council tax were increased. Central government grants – including retained business rates – were cut 37% in real-terms between 2009//20, from £41.0bn to £26.0bn in 2019/20 prices. This is because largely because of reductions in central government grants, which have been the most sharply cut component of local government revenue since 2009/10. Local authority ‘spending power’ – that is, the amount of money local authorities have to spend from government grants, council tax, and business rates – has fallen by 16% since 2010. How has local government funding changed since 2010? Twelve percent of the UK's taxes were collected, or intended to be collected, locally in 2014, compared to 17% collected locally or federally in Italy, 30% in Germany, and almost 50% in Canada. In 2014, every other G7 nation collected more taxes at either a local or regional level, according to the Organisation for Economic Co-operation and Development. Local government in England has very limited revenue-raising powers compared to other wealthy countries. Once reserves are spent, they cannot be spent again. Unlike central government, local authorities cannot borrow to finance day-to-day spending, and so they must either run balanced budgets or draw down reserves – money built up by underspending in earlier years – to ensure that their annual spending does not exceed their annual revenue. In 2019/20, local authorities in England received 23% of their funding from government grants, 50% from council tax, and 27% from retained business rates – revenue from business rates that they do not send to the Treasury. business rates – a property tax levied on business premises.council tax – a property tax levied on residential properties. government grants – money from central government for local services.Local authorities have three main sources of revenue: How is local government funded in England? Local authorities in England deliver social care for children and adults, ‘neighbourhood services’ such as libraries and waste collection, and some aspects of transport, housing, and education.
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