Local government finance Flashcards
(22 cards)
Where do local government receive their money from?
a range of sources including Government grants, council tax, fees and charges.
➢ Together, council tax and business rates are the largest source of income.
What is capping?
which gave central government the power to limit the level of tax a local authority could levy.
What is the community tax?
the replaced a domestic property tax with a tax on adulthood – the community charge or poll tax
What is a ring fenced grant?
which told councils how and where to spend the money.
How does funding work (general grants) from cent gov to local?
local authorities in deprived areas get 75% of their funding from government grants, while others, in richer area, get only 20%. this means a cut in central government funding can be way more devastating for local authorities more reliant.
Government plans to cut the deficit under “austerity” measures had a large impact on councils – with real terms cuts between 2010 and 2019
In recent years, the government has reversed the Labour trend of ring-fenced grants.
What are some topical issues regarding funding?
Covid, school places and transport, adult social care
What is revenue expenditure?
this is the money councils spend on day-to-day running costs – it makes up the majority of spending – and includes things such as wages, repair and maintenance, heating, payments to suppliers, stationery, materials, fuel etc. Traditionally, 70% of revenue funding has come from central government.
What is council tax?
introduced in 1993.
main income councils can set for themselves, along with rents, fees and charges etc.
It is based on the value of a domestic property and the number of adults living in it. It is a hybrid tax including both property (50%) and personal
Some properties are eligible for discounts or exempt from council tax, while people on lower incomes can apply for support to reduce their bill.
Each year, the Government publishes referendum thresholds for council tax increases. If a council increases council tax above the threshold they are required by law to hold a referendum.
What is capital expenditure?
he rest of local authority spending goes on this – large-scale building and refurbishment projects which can cost millions.
This money has to be raised separately to the revenue budget.
Capital programmes usually run over 3-5 years, things like new schools, roads, facilities have to be planned for and money borrowed to finance the projects – which may take years to repay.
What is council spending?
councils plan their budgets months before they know how much they will get from central government.
They make funding decisions based on what they expect to receive, the income they can generate and how to use any reserves to fund spending or cut council tax.
A council’s planned spending after deducting these amounts is known as its budget requirement. The difference between this and the final settlement from government determines by how much council tax has to rise.
Some pros and cons of council tax?
A property tax is difficult to evade and cheap to collect
➢ It has a predictable yield and makes budgeting straightforward – it bring in what you expect
Cons:
It is regressive – fails to take account of ability to pay
Occupation of property is not a good indicator of ability to pay
Low yield – only funds under a third of revenue expenditure
Can favour the occupiers of expensive properties Valuations are out of date
Who is exempt from paying council tax?
full time students, student nurses, apprentices, patients in long-term care, the severely mentally-impaired, monks and nuns.
Some properties are exempt. These include: student houses, properties which are empty/unfurnished for more than six months or empty because the resident is in hospital, care or prison.
Who collects council tax?
billing authorities- These are the authorities which collect the tax – on their behalf and for precepting authorities.
Who sets the precept?
Precepting authorities:
Set precepts – a demand on a billing authority to raise and collect a charge on their behalf.
How is council tax calculated?
All domestic properties are placed in eight bands, depending on their market value.
➢ Valuations are based on the price the property would have sold for on the open market on 1 April 1991
Each authority sets its own council tax, but the ratios must
remain the same throughout the country.
➢ BandDisthebaseband–thoseinBandHpaytwiceas
much and those in Band A pay two thirds of Band D.
➢ To set the council tax, the authority calculates how many
Band D properties are in the area, sets the tax for this band
and then calulates the others before billing each property.
Who can you appeal to about your council bracket tax?
Valuation appeals – occupiers can appeal to the valuation
tribunal against their property band.
What are two other sources of funding?
Rents, fees and charges –
➢ Local authorities charge for some of their services, such as adult community care (contributions from the elderly), rents (from houses, industrial units, shop units etc), planning permission, recreation and leisure facilities, burials and cremations and parking charges.
Balances and reserves –
➢ This is savings and money set aside by councils for emergencies which may be used to cut council tax or to cover additional costs incurred by events such as heavy snow or floods – once it is spent, it cannot be spent again.
What is a general block grant?
councils can
spend how they choose. These are – non- domestic (business) rates
What is a specific grant?
Specific grants for particular services; councils have little choice about how to spend the money (it is ring-fenced). These include the dedicated schools grant, police grant and the public health grant for councils’ health responsibilities.
What are business rates?
Businesses contribute to local services through business rates – a property tax paid by occupiers of commercial and industrial properties in England and Wales.
set by central government and collected by local councils.
Properties are given a rateable value – based on open market rental value. These valuations are reassessed every 5 years.The valuation date is set 2 years before the new rates come into effect. The next revaluation comes into effect in April 2023.
