Headlines: July 22nd, 2003

The Local Government Information Unit is calling for a radical overhaul of local government finance following the publication of figures which show that 80 per cent of local authority spending comes from central government grants. The think tank says the figures from the Chartered Institute of Public Finance and Accountancy (CIPFA) confirm the broad trend towards increased central financial control of local government that it has identified in its own recent research.The unit says analysis has shown that purpose-specific central government grants have risen by 137 per cent from 4.9 billion pounds in 1997-98 to 11.7 billion in this financial year. Meanwhile, it says, mainstream central government grant funding of local authorities, which represented 41 per cent of revenue in 1997-98, has accounted for only 23 per cent of the extra 24 billion pounds going to town halls since then. The LGIU says this shows that not only is four fifths of money for local authority services determined by central government, but less than a quarter of this new money can be spent to meet locally determined need.

It adds that of the extra 24 billion of funding only 15 per cent has come from local businesses, with the overall Business Rate element of council income falling from 26.5 per cent to 22 per cent in over the period. This, it says, means businesses pay a smaller share towards local council services than at any time since 1981.

Cllr Dave Wilcox, chairman of the LGIU, said that despite the increased burden on many council tax payers, there was still an overwhelming bias towards services being funded and controlled from the centre which undermined the ethos of local democracy.

“The result of the over-centralisation is that the new investment for local services that is happening is not used as effectively as it might be and the Government does not gain the credit that it deserves. Now that the Government has put its review of local government finance out to public consultation, the opportunity must not be wasted. We need a radical overhaul of local government finance that simplifies the system and shifts the balance of funding towards more than half of town hall revenue being raised locally,” he said.