An audit report said that local councils in England should focus more attention on the £12.9 billion set aside in their reserves – the equivalent of nearly one-third of their net spending on services – and provide greater clarity about the reasons for holding reserves.
Source: Striking a Balance: Improving councils' decision making on reserves, Audit Commission
Links: Report | Audit Commission press release | BBC report | Public Finance report
Date: 2012-Dec
An audit report said that in 2011-12 local councils in England had largely delivered their planned savings and in many cases had added to reserves. However, signs of financial stress were visible. A sizeable minority of councils had had to make additional in-year cuts, seek additional funding, or restructure efficiency programmes in order to deliver their budgets.
Source: Tough Times 2012: Councils responses to a challenging financial climate, Audit Commission
Links: Report | Audit Commission press release | CIPFA press release | LGA press release | Public Finance report
Date: 2012-Nov
A paper examined the spending cuts by local authorities in Wales since 2009-10, and medium-term prospects. Net spending per person had been reduced by 8.4 per cent in real terms so far, and cuts look set to continue for at least the next four years. Even under the most optimistic assumptions spending power per person would be 9 per cent lower in real terms in 2016-17 than in 2012-13.
Source: Rowena Crawford, Robert Joyce, and David Phillips, Local Government Expenditure in Wales: Recent trends and future pressures, Briefing Note 131, Institute for Fiscal Studies
Links: Briefing Note | IFS press release | WLGA press release | BBC report
Date: 2012-Oct
The Local Government Finance Act 2012 was given Royal assent. The Act ended the existing system under which all business rates in England were paid into a central pot and then redistributed to local councils using a grant. Instead, councils would be able to directly retain a portion of their business rate growth. A system of tax increment financing would give local authorities the freedom to borrow against future income from business rates, and use the money to pay for road and transport projects and other 'local priorities'. A levy would be introduced to take back a share of growth from councils deemed to be gaining disproportionately from the changes. This money would then be used to fund a safety net to support councils that experienced a significant drop in business rates through events such as the closure of a large business.
Source: Local Government Finance Act 2012, Department for Communities and Local Government, TSO
Links: Act | Explanatory notes
Date: 2012-Oct
An audit report in Scotland said that information on how local councils spent their £21 billion annual budget was often 'of poor quality, unclear and incomplete'. Reports produced by local authorities suffered from a lack of 'balance', with positive messages taking precedence over areas that needed improvement.
Source: Managing Performance: Are you getting it right?, Audit Scotland
Links: Report | Audit Scotland press release | BBC report | Public Finance report
Date: 2012-Oct
A think-tank report examined local authority pension funds. Many funds were starting to take an interest in local capital projects (such as social housing) that offered wider socio-economic benefits as part of their investment strategies. The report called for smarter government initiatives and set out an agenda for alternative local investment.
Source: Local Authority Pension Funds: Investing for Growth, Smith Institute
Links: Report | Public Finance report
Date: 2012-Sep
Date: 2012-Jun
The coalition government published a statement of intent in relation to its proposed business rates retention scheme for local councils in England. It said that locally collected business rates would be shared equally between central and local government.
Source: Business Rates Retention Scheme: The Central and Local Shares of Business Rates – A Statement of Intent, Department for Communities and Local Government
Links: Statement of intent | DCLG press release | Impact assessment | LGA press release | Public Finance report
Date: 2012-May
The Local Government Finance Bill was given a third reading. The Bill was designed to end the existing system under which all business rates in England were paid into a central pot and then redistributed to local councils using a grant. Instead, councils would be able to directly retain a portion of their business rate growth. A system of tax increment financing would give local authorities the freedom to borrow against future income from business rates, and use the money to pay for road and transport projects and other 'local priorities'. A levy would be introduced to take back a share of growth from councils deemed to be gaining disproportionately from the changes. This money would then be used to fund a safety net to support councils that experienced a significant drop in business rates through events such as the closure of a large business.
Source: Local Government Finance Bill, Department for Communities and Local Government, TSO | Debate 21 May 2012, columns 864-958, House of Commons Hansard, TSO
Links: Bill | Explanatory notes | Hansard | Centre for Cities briefing
Date: 2012-May
The coalition government announced (following consultation) plans to provide greater local flexibility over the administration of council tax. People would have a new right to choose to pay their council tax bills in 12 monthly payments, rather than 10. Local councils would have new powers to tackle long-term empty homes through an 'empty homes premium'.
Source: Technical Reform for Council Tax: Summary of Responses Report, Department for Communities and Local Government
Links: Report | DCLG press release
Date: 2012-May
An article examined the structure and workings of the 'four block' model for distributing funds from central to local government in England. It highlighted key methodological shortcomings, and explained why the resulting distribution of the formula grant was both arbitrary and inequitable. In particular it said that key model parameters – specifically the need and resource equalization proportions – were set in order to fulfil a particular funding outcome: this flew in the face of the basic tenets of resource allocation methodology in that, being outcome-led, the approach was clearly neither need-based nor impartial. The four block model failed to meet its own goal of fiscal equalization, was likely to lead to increasing service disparities, and needed to be replaced as a matter of urgency.
Source: Alex Gibson and Sheena Asthana, 'A tangled web: complexity and inequality in the English local government finance settlement', Local Government Studies, Volume 38 Issue 3
Links: Abstract
Date: 2012-May
An article examined the strengths and weaknesses of the prudential borrowing framework as a control mechanism for borrowing by local authorities.
Source: Stephen Bailey, Darinka Asenova, and John Hood, 'The UK's prudential borrowing framework: professional discipline and control', Local Government Studies, Volume 38 Issue 2
Links: Abstract
Date: 2012-Mar
A think-tank report examined innovative funding mechanisms for local infrastructure. It said that local government could help to re-energize the economy by taking advantage of new funding options such as tax increment financing, bonds, and enterprise zones – allied to more creative use of public assets to build long-term partnerships.
Source: Richard Carr, Credit Where Credit s Due: Investing in local infrastructure to get Britain growing, Localis
Links: Report | Localis press release
Date: 2012-Mar
A report said that there was a 'credible evidence base' underpinning the tax increment funding model as a means of promoting economic expansion, supporting job creation, and facilitating neighbourhood regeneration.
Source: Norman Hutchison, Nan Liu, Alastair Adair, Jim Berry, Martin Haran, and Stanley McGreal, Tax Increment Funding: An Opportunity for the UK?, Royal Institution of Chartered Surveyors
Links: Report
Notes: Tax increment financing allows local authorities to borrow money for infrastructure projects against the anticipated increase in business rates income expected as a result of the projects.
Date: 2012-Mar
A short report by a committee of MPs set out the issues that would provide a starting point for a full inquiry and report in 2013 on the issue of community budgets.
Source: Taking Forward Community Budgets, Ninth Report (Session 2010-12), HC 1750, House of Commons Communities and Local Government Select Committee, TSO
Links: Report
Notes: Community budgets were introduced in October 2010 as part of the Spending Review with the aim of giving local public service partners in England greater financial freedoms.
Date: 2012-Feb
A think-tank report said that the coalition government's plans to give local councils in England control of business rates included perverse incentives that could slow down the approval of commercial developments in future years. It called on the government to rethink its decision to review the funding distribution formula only once every 10 years.
Source: Zach Wilcox, Urban Outliers: Will the Local Government Finance Bill incentivise growth in all England s cities?, Centre for Cities
Links: Report | Summary | Public Finance report
Date: 2012-Feb
An article examined the formula used to allocate central government funding to local authorities in England.
Source: Mervyn Stone, 'Getting to grips with England's formula for local authority support', Public Money and Management, Volume 32 Issue 2
Links: Abstract
Date: 2012-Feb
A report examined how budget cuts would affect the capacity of local government in England to meet the needs of more deprived households and communities. The most deprived local authorities had been hardest hit by the cuts, and there was evidence of conflict within local authorities over whether the needs of vulnerable people should be prioritized.
Source: Annette Hastings, Glen Bramley, Nick Bailey, and David Watkins, Serving Deprived Communities in a Recession, Joseph Rowntree Foundation
Links: Report | Summary | JRF press release | Public Finance report
Date: 2012-Jan
The Local Government Finance Bill was given a second reading. The Bill was designed to end the existing system under which all business rates in England were paid into a central pot and then redistributed to local councils using a grant. Instead, councils would be able to directly retain a portion of their business rate growth. A system of tax increment financing would give local authorities the freedom to borrow against future income from business rates, and use the money to pay for road and transport projects and other 'local priorities'. A levy would be introduced to take back a share of growth from councils deemed to be gaining disproportionately from the changes. This money would then be used to fund a safety net to support councils that experienced a significant drop in business rates through events such as the closure of a large business.
Source: Local Government Finance Bill, Department for Communities and Local Government, TSO | Debate 10 January 2012, columns 79-137, House of Commons Hansard, TSO
Links: Bill | Explanatory notes | Hansard
Date: 2012-Jan