Headlines: January 26th, 2004

New research has highlighted the need for the government to address the historic under funding of council services as part of its current review of the central-local balance within council funding. The Local Government Information Unit has been studying the long-term causes of the Government’s council tax crisis.

The research is summarised in a new pamphlet, “Settling the Account – Local Government Funding Investigated” The research was conducted by the independent finance experts, Rita Hale Associates during 2003 and looks at the trends in local government finance since the 1980s.

On long-term under funding it says that since 1990-91, planned spending on the National Health Service has risen by 140 per cent. In the same period local government spending in England rose by 130 per cent, despite being subject to similar inflationary pressures. It points, too, to the fact that Whitehall’s specific grants impose central control on spending. The report says that of the new money available for local government services since 1997, a high proportion has been earmarked by central government for particular uses such as education. Specific grants in England for education rose from less than 250 million pounds in 1997-98 to more than 3.5 billion this year. This has led to that local priorities being overruled by Whitehall.

At the same time, it says, central government diktats on spending priorities have not been fully supported by funding from Whitehall. This failure to fully fund priorities has caused an upward pressure on the council tax for generating revenue. The report also examines the claim that the business sector escapes its share of the council tax burden. It finds that in 1989-90 the National Non-Domestic Rate covered 31 per cent of local authority spending. By this year the figure had fallen to 22 per cent. The publication of “Settling the Account” follows the recent report by the Audit Commission that found that central government policy was the main cause of rising council tax bills in 2003-04 and publication of the Local Government Association’s proposals for a range of new local tax-raising powers for local government.

Councillor Dave Wilcox, who chairs the LGIU, said the current local government finance system was unsustainable. A reformed council tax had to be practical to administer and balance a range of factors, including income versus wealth in the form of property, and a fairer split between business and domestic taxpayers.