A think-tank report charted the history of local government funding in England and Wales. It showed how the highly centralised system of local government finance was a product of central government's desire to ensure equality of service provision across the country and maintain fiscal discipline. Any reform of local government finance would have to confront the long-running tension between equality and local control.
Source: Tony Travers and Lorena Esposito, The Decline and Fall of Local Democracy: A history of local government finance, Policy Exchange (020 7340 2650)
Links: Guardian review
Date: 2003-Dec
Researchers explored the relationship between balance of funding and turnout in local government elections - and in particular the suggestion that a lack of fiscal discretion for local councils was one factor explaining public indifference to local elections. They found little or no strong evidence for a relationship of the kind sought.
Source: Colin Rallings and Michael Thrasher, The Relationship between Balance of Funding and Turnout in Local Government Elections, Office of the Deputy Prime Minister (0870 1226 236)
Links: Report (pdf) | Tables (pdf)
Date: 2003-Dec
Nearly 90 per cent of consultation responses agreed with the principles behind a plan to allow local authorities to retain some revenue from non-domestic rates.
Source: Local Authority Business Growth Incentives: Report of responses to public consultation, Office of the Deputy Prime Minister (0870 1226 236)
Links: Report (pdf) | ODPM press release
Date: 2003-Dec
A think-tank paper examined the advantages and disadvantages of different options for the reform (as opposed to abolition) of council tax. It assessed their feasibility according to a range of criteria: progressivity, local accountability, evenness of distribution and balance of funding.
Source: Options for Reform of Council Tax, New Policy Institute (020 7721 8421)
Links: Report (pdf)
Date: 2003-Dec
The Audit Commission said that 'fundamental flaws' in the system of funding local government contributed to record council tax increases in 2003. Councils also contributed to the rises by allowing double-digit increases to become the norm, even though some were benefiting from increased funding through a regional redistribution. In the absence of adequate 'peer pressure' to moderate increases, the drive for cost savings was blunted. The report recommended that the review of local government funding (already under way) should seek to reduce the proportion of funding coming from central government; it also urged greater transparency in the way government calculated its annual grant.
Source: Council Tax Increases 2003/04: Why were they so high?, Audit Commission (0800 502030)
Links: Report (pdf) | Report | Summary (pdf) | Audit Commission press release | LGA press release | Guardian report (1) | Guardian report (2)
Date: 2003-Dec
The government announced an additional 340 million in central funding for local authorities in England for 2004-05, on top of the 54.1 billion announced in the provisional local government finance settlement in November 2003. It threatened to intervene to prevent 'excessive' increases in council tax.
Source: Pre-Budget Report: The strength to take the long-term decisions for Britain - Seizing the opportunities of the global recovery, Cm 6042, HM Treasury, TSO (0870 600 5522) | House of Commons Hansard, Debate 10 December 2003, columns 1061-1086, TSO | House of Commons Hansard, Written Ministerial Statement 11 December 2003, columns 98-99WS, TSO
Links: Report (pdf) | Hansard 10/12 | Hansard 11/12 | ODPM press release (1) | ODPM press release (2) | ALG press release | LGA press release | Guardian report
Date: 2003-Dec
The government announced new measures enabling local authorities to promote economic development. It said it would proceed with the local authority business growth scheme, which could mean an additional 1 billion for local authorities by allowing them to retain a proportion of the growth in business rate income to spend on local priorities. It also published a guide to policy measures already available to promote regeneration in the most deprived communities, including stamp duty exemptions on local property transactions and community investment tax relief.
Source: Press release 17 November 2003, HM Treasury (020 7270 4558) | Enterprise Areas: Tackling barriers to enterprise in our most disadvantaged communities, HM Treasury (020 7270 4558) and Office of the Deputy Prime Minister
Links: HMT press release | Guide (pdf) | Guardian report
Date: 2003-Nov
The government announced that it proposed to give English local authorities an average increase in central government grant of 6.5 per cent for 2004-05, increasing it to 54.1 billion. It said that this would mean funding had risen by 29 per cent in real terms in seven years. 750 million of the overall grant would be removed from 'ring-fencing', giving authorities more flexibility in their spending decisions. An extra 300 million would be made available to ease funding pressures on non-schools services. The local government general grant would rise by 4.7 per cent to 45.8 billion. The government said it expected local authorities to limit council tax increases, and that it would use capping powers if necessary. Local authorities said the settlement only went some way to closing a funding 'gap' of 800 million.
Source: Revenue Support Grant for 2004-05 and Related Matters: Consultation paper, Office of the Deputy Prime Minister (0870 1226 236) | House of Commons Hansard, Debate 19 November 2003, columns 786-806, TSO (0870 600 5522) | Press release 19 November 2003, Local Government Association (020 7664 3000)
Links: Consultation letter (pdf) | Links to related documents | Hansard | ODPM press release | LGA press release | Guardian report
Date: 2003-Nov
The government published guidance on the scope of local authorities' power to charge for discretionary services. (The Local Government Act 2003 included a general power for 'best value' authorities in England and in Wales to charge for discretionary services.)
Source: General Power for Best Value Authorities to Charge for Discretionary Services: Guidance on the power in the Local Government Act 2003, Office of the Deputy Prime Minister (0870 1226 236)
Links: Guidance (pdf)
Date: 2003-Nov
The government published a summary of key facts and trends relating to local government finance in England.
Source: Local Government Financial Statistics England No.14 2003, Office of the Deputy Prime Minister (0870 1226 236)
Links: Report (pdf links)
Date: 2003-Nov
Kent county council (the largest local authority in England and Wales) reportedly proposed that the council tax increase for 134,000 pensioner households - about a quarter of all households in the county - should be tied to the inflation rate in 2004-05. It told the government that it would make up the funding shortfall by asking the remaining three-quarters for an extra 30p a week. (In 2003-04 Kent introduced a 12.5 per cent increase - five times above inflation, but close to the national average - leading to protests from pensioners.) Three other county councils were subsequently reported as saying that they were considering a similar move.
Source: The Guardian, 4 October 2003 | The Guardian, 14 October 2003
Links: Guardian report 4/10 | Guardian report 14/10
Date: 2003-Oct
The government published a summary of responses to a consultation exercise on the future funding of local government. The official steering group conducting a review of the issue decided to commission detailed work on options including a full reform of council tax, introduction of a local income tax, and the re-localisation of business rates.
Source: Summary Report of Responses to Public Consultation, Office of the Deputy Prime Minister (020 7944 3000)
Links: Report (pdf) | ODPM press release | Steering Group papers (links) | Guardian report (1) | Guardian report (2)
Date: 2003-Oct
A report called for a non-political 'Grants Commission' to be established to identify the real needs of the United Kingdom s nations, regions and local authorities, as a means for setting in place a fairer method for distributing central funding.
Source: Iain McLean and Alistair McMillan, New Localism, New Finance, New Local Government Network (020 7357 0051)
Links: NLGN press release
Date: 2003-Sep
The government said that it could not find any local authorities eligible for a 'safety valve' grant in 2004-05 - a grant intended to help those authorities with high levels of council tax but low unit costs, who did not benefit from the new grant formulae. Accordingly it was no longer intending to introduce the grant.
Source: House of Commons Hansard, Written Ministerial Statement 18 September 2003, column 64WS, TSO (0870 600 5522)
Links: Hansard
Date: 2003-Sep
The government said that the trend in council tax rises was 'not sustainable', and that it was prepared to use its targeted capping powers in 2004 05 - including, in exceptional circumstances, authorities categorised as 'good' or 'excellent' in comprehensive performance assessments. Local authorities reacted angrily, saying that broken commitments on capping would damage partnership between central and local government.
Source: House of Commons Hansard, Written Ministerial Statement 15 September 2003, column 38WS, TSO (0870 600 5522) | Press release 15 September 2003, Local Government Association (020 7664 3000)
Links: Hansard | LGA press release | Guardian report
Date: 2003-Sep
The government issued three consultation papers on subsidy for capital investment, under the new regime giving local authorities greater freedom over investment decisions.
Source: New Prudential System of Local Government Capital Finance: Consultation on draft regulations, Office of the Deputy Prime Minister | Support for Local Authority Capital Investment, Office of the Deputy Prime Minister | Future Housing Capital Financing Arrangements: Consultation paper, Office of the Deputy Prime Minister (020 7944 3000)
Links: New Prudential System | Support for Capital Investment (pdf) | Future Arrangements (pdf) | Future Arrangements | IPF press release (1) | IPF press release (2)
Date: 2003-Aug
The government began consultation on a scheme designed to reward local authorities for encouraging business growth. The scheme would allow councils to retain money from business rates where there was increased economic growth in their area, starting in April 2005.
Source: Local Authority Business Growth Incentives Consultation paper, Office of the Deputy Prime Minister (0870 1226 236) | House of Commons Hansard, Written Ministerial Statement 4.7.03, columns 37-38WS, TSO (0870 600
Links: Consultation document (pdf) | Summary (pdf) | Hansard | ODPM press release | Guardian report
Date: 2003-Jul
The government began consultation on the balance between central and local sources of local government funding (that is, between central grant and business rates on one hand, and council tax on the other). It said the exercise was 'the most significant examination of the financing of local government in 25 years'.
Source: Press release 16.7.03, Office of the Deputy Prime Minister (020 7944 3000)
Links: ODPM press release | Consultation letter (pdf)
Date: 2003-Jul
A survey found that net revenue expenditure by local authorities in England and Wales in 2003-04 would increase by 9.7 per cent, to 67.6 billion. The amount of specific and special grants paid by central government towards the cost of providing particular services increased by almost 25 per cent between 2002-03 and 2003-04, increasing the total spend on services by 13.8 per cent. Central government grants accounted for about 80 per cent of authorities' spending: a local government research group said this showed the need for a 'radical overhaul of local government finance'.
Source: Finance and General Statistics 2003/04, Chartered Institute of Public Finance and Accountancy (020 8667 1144) | Press release 16.7.03, Local Government Information Unit (020 7554 2800)
Links: CIPFA press release | LGIU press release
Date: 2003-Jul
Budget estimates were published of English local authority revenue expenditure and financing for 2003-04. Budgeted net current expenditure was 78.2 billion: 39 per cent on education, 18 per cent on social services and 12 per cent on police. Budgeted revenue expenditure (including capital expenditure but excluding certain specific grants) was 72.5 billion: 26 per cent to be raised through council tax, 61 per cent from formula grant and 13 per cent from specific grants.
Source: Local Authority Revenue Expenditure and Financing: England 2003-04 budget, Office of the Deputy Prime Minister (020 7944 3000)
Links: Report (pdf)
Date: 2003-Jul
An audit report said that, between 1997 and 2002, total arrears of rent owed to local authorities in England and Wales rose by 20 per cent, from 335 million to 403 million; that arrears owed by former tenants rose by 42 per cent, from 172 million to 244 million; and that tenants' average debts increased by 41 per cent, from 246 to 348 - double the increase in average council rent levels. A number of causes were identified, including delays in housing benefit payment, higher tenancy turnovers disrupting administration, and an increased likelihood that tenants were on low incomes and dependent on benefits.
Source: Local Authority Housing Rent Income: Rent collection and arrears management in England and Wales, Audit Commission (0800 502030)
Links: Report (pdf) | Summary (pdf) | Audit Commission press release
Date: 2003-Jun
English councils collected 96.4 per cent of collectable taxes in 2002-03 (compared to 96.1 per cent in 2001-02).
Source: Press release 26.6.03, Office of the Deputy Prime Minister (020 7944 3000)
Links: Press release
Date: 2003-Jun
Official figures showed that the average council tax in England per dwelling would be 908 in 2003-04, compared with 804 in 2002-03 - an increase of 12.9 per cent. The average council tax for a Band D dwelling (occupied by two adults) would be 1,102, compared with 976 in 2002-03. The government said there was no justification for some of the high increases, and that councils must explain themselves to their taxpayers 'and, if necessary, to the government'. Local authorities blamed 'fundamental flaws' in the system of local government funding.
Source: Press releases 25.3.03, Office of the Deputy Prime Minister (020 7944 3000) | Press release 25.3.03, Local Government Association (020 7664 3000)
Links: ODPM press release (1) | ODPM press release (2) | LGA press release | Guardian report
Date: 2003-Mar
The government confirmed, following consultation, that spending on local authority services in England would increase by 5.9 per cent overall between 2002-03 and 2003-04.
Source: The Local Government Finance Report (England) 2003/2004, Cm 369, Office of the Deputy Prime Minister, TSO (0870 600 5522) | House of Commons Hansard, Written Ministerial Statement 3.2.03, columns 1-2WS, TSO | House of Commons Hansard, Debate 5.2.03, columns 353-406, TSO
Links: Report (pdf) | Hansard 3.2.03 | Hansard 5.2.03
Date: 2003-Feb
The government announced that the Local Government Bill would be amended to include new provisions allowing councils to retain revenue from increased economic growth and regeneration in their area. The scheme will allow local authorities to keep revenues associated with any growth in the business rate tax base.
Source: Press release 25.2.03, Office of the Deputy Prime Minister (020 7944 3000)
Links: ODPM press release | LGA press release
Date: 2003-Feb
A committee of MPs criticised the government for its 'woeful' performance in managing local government finance. It said that formulae used to allocate funds for education and social services 'do not appear to be evidence-based', and that poverty indicators are used 'seemingly at whim'. It also criticised the census, suggesting it might not be a reliable basis for determining local authority grants. Westminster Council in London reportedly demanded that the census be re-run in its borough, claiming it had produced a major underestimate of its population.
Source: Local Government Finance: Formula Grant Distribution, First Report (Session 2002-03), HC 164-I, House of Commons Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Select Committee, TSO (0870 600 5522) | The Guardian, 8.1.03
Links: Report | Guardian report
Date: 2003-Jan
The government announced the launch of a major review of local government funding. The review will consider how the balance of funding between what is raised nationally and locally affects local government, and how finance affects service provision and local democratic accountability. It will be conducted by a group of experts, chaired by the local government minister.
Source: Press release 20.1.03, Office of the Deputy Prime Minister (020 7944 3000)
Links: Press release
Date: 2003-Jan
A report argued that business rate transitional arrangements must be fundamentally reformed if they are to be less complicated and fairer to businesses.
Source: Occupiers Property Databank, The Future of Business Rating Transition in England, Royal Institution of Chartered Surveyors (020 7695 1535), Institute of Revenues, Rating and Valuation, and Rating Surveyors Association
Links: Report (pdf) | Summary (pdf) | Press release
Date: 2003-Jan