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English local government finance: issues and options

Published Monday, September 1, 2014

Local government finance in England has experienced substantial changes since 2010. This paper examines the challenges that local authorities have faced from reductions in central government funding, and how they have responded to these. Local authorities have been using a number of strategies to cope with reduced funding, including community budgets, city deals, efficiency savings, combined authorities and shared services. They have also reduced or redesigned services, and collected more local taxes where possible.

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Local government finance in England has experienced substantial changes since 2010. This paper examines the challenges that local authorities have faced from reductions in central government funding, and how they have responded to these. Local authorities have been using a number of strategies to cope with reduced funding, including community budgets, city deals, efficiency savings, combined authorities and shared services. They have also reduced or redesigned services, and collected more local taxes where possible.

The paper provides an overview of how local taxation works through Council Tax and Business Rates but also examines some of the ways others have proposed that local taxation could be adjusted to allow local authorities greater flexibility over their revenue. Alongside council tax and business rates, some additional tax raising powers already exist, such as the power to levy a congestion charge and a workplace parking levy. A local income tax, either replacing or complementing the council tax, has also been proposed in the past.

Commons Briefing papers RP14-43

Author: Mark Sandford

Topic: Local government

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