Local government finance in England
KEY FACTS AND TRENDS
Local government finance in England K.1 Overview K.1.1
In England, local authorities’ total expenditure was £141 billion in 2005-06 compared with £130 billion in 2004-05 and £122 billion in 2003-04. After deducting non-grant income, the overall cost to the central and local taxpayer of local authority services works out at around £115 billion, or £2,300 per head in 2005-06. (See section 1.6)
£ billion
Chart K.1a: Local authority gross income and expenditure 2005-06 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0
Trading services £1bn Housing Revenue Account £7bn Capital grants & receipts £9bn Other £10bn Sales, fees & charges £11bn Grants outside AEF £15bn
Trading services £1bn Housing Revenue Account £4bn Capital £17bn Interest £3bn
Running expenses £61bn
Revenue grants £64bn Employees £56bn Council tax £21bn Income
Expenditure
K.2 The pattern of spending K.2.1
In 2005-06, net current expenditure (See section 3.2) on general services was £97.2 billion. Total capital expenditure was £16.6 billion. (See section 4.1)
1
Local Government Financial Statistics England No.17 2007
Chart K.2a: Expenditure on services 2005-06 40 35
£ billion
30 25 20 15 10 5 0 Education
Highways Social services and transport
Housing
Net current expenditure
K.2.2
Police
Fire
Other services
Capital expenditure
Comparisons of service expenditure over time are affected by changes in local government responsibilities. After adjusting for the expenditure of former grant maintained schools, net current expenditure on education increased by about 33% in real terms between 2000-01 and 2005-06. Other Services have increased by 43% over the same period, mainly due to Highways and Transport and Non-HRA housing. (See section 3.5) Chart K.2b: Net current expenditure by service 2000-01 to 2006-07 real terms, 2005-06 prices
100
£ billion
80
60
40
20
0 2000-01 Education
K.2.3
2
2001-02
2002-03 Social services
2003-04
2004-05
2005-06
2006-07
Other services
Capital expenditure on education and transport has more than doubled in real terms between 2000-01 and 2005-06. Capital expenditure on housing has increased at a lower rate of 43% during the same period and other services at 90%. (See section 4.1)
Local Government Finance in England – Key Facts and Trends
Chart K.2c: Total capital expenditure by service 2000-01 to 2006-07 real terms, 2005-06 prices
20
£ billion
15
10
5
0 2000-01 Education
2001-02
2002-03 Transport
2003-04
2004-05
Housing
2005-06
2006-07
Other services
K.3 Balance of funding About 61% of local authorities’ gross income in 2005-06 came from central government, and the remaining 39% from local sources, including council tax, charges, rents and capital receipts. (See section 2.1) Using a narrower definition, 75% of revenue expenditure was funded from government grant in 2005-06, and 25% from local taxes. The locally-funded percentage increased slightly after the introduction of the council tax in 1993-94, but it has remained very stable since 1998-99 (See section 3.5) Chart K.3a: Sources of revenue funding 1993-94 to 2006-07 real terms, 2005–06 prices 50 45 40 35 30 25 20 15 10 5 0 19 93 -9 4 19 94 -9 5 19 95 -9 6 19 96 -9 7 19 97 -9 8 19 98 -9 9 19 99 -0 0 20 00 -0 1 20 01 -0 2 20 02 -0 3 20 03 -0 4 20 04 -0 5 20 05 -0 6 20 06 -0 7
£ billion
K.3.1
Government grants
Business rates
Council tax
3
Local Government Financial Statistics England No.17 2007
Chart K.3b: Balance of funding 1993-94 to 2006-07 Percentage of revenue expenditure locally funded 30%
25%
20%
15%
10%
5%
7
6
-0 06 20
20
05
-0 04
-0
5
4 -0 20
03
-0
3 20
2 20
02
-0
1
01 20
-0
0
00
-0
20
-9
9 19 99
8 98 19
-9
97 19
96 19
-9
7
6 -9 95
-9
5 19
94 19
19
93
-9
4
0%
K.4 Council tax K.4.1
Council tax raised £22.5 billion in 2006-07, around £3 billion of which was funded by means-tested council tax benefit. Since the introduction of council tax in 1993-94, council tax bills have increased by 123%, more than three times the rate of inflation, and almost double the increase in average earnings. (See section 2.2) Table K.4a: Annual increases in average Band D council tax
4
% increase
real terms % increase
1994-95
2.1
-0.4
1995-96
5.0
1.6
1996-97
6.1
3.6
1997-98
6.5
4.0
1998-99
8.6
4.4
1999-00
6.8
5.1
2000-01
6.1
3.1
2001-02
6.4
4.5
2002-03
8.2
6.7
2003-04
12.9
9.5
2004-05
5.9
3.3
2005-06
4.1
0.8
2006-07
4.5
1.9
Local Government Finance in England – Key Facts and Trends
Chart K.4b: Cumulative increase in council tax, retail prices and average earnings since 1993-94 140%
Percentage increase
120% 100% 80% 60% 40% 20% 0%
1
3 99
4 -9 1
4 99
6
5 -9
-9
5 99
1
Council tax
7 -9
98
799
1
00
9
-9
8 99
1
1
999
2
Retail Price Index
03
2
1
-0
-0
0 00
2
1 00
2
200
2
3 00
-0
4
5
-0
4 00
2
2
500
06
7
-0
6 00
2
Average earnings
Since 1993-94, the percentage of council tax collected in-year in England has improved steadily until, in 2005-06, authorities collected 96.8% of council tax collectable in-year. The biggest improvement has been made in the collection rate of Inner London boroughs which collected 93.9% of council tax in 2005-06 as opposed to 76.0% in 1993-94. (See section 2.2) Chart K.4c: Council tax collection rates 1993-94 to 2005-06 100
95 90
85 80
75 0 19 93 -9 4 19 94 -9 5 19 95 -9 6 19 96 -9 7 19 97 -9 8 19 98 -9 9 19 99 -0 0 20 00 -0 1 20 01 -0 2 20 02 -0 3 20 03 -0 4 20 04 -0 5 20 05 -0 6
% council tax collected in year
K.4.2
1
6 99
All England Unitary authorities
Outer London
Inner London
Metropolitan districts
Shire districts
5
Local Government Financial Statistics England No.17 2007
K.5 Regional variations K.5.1
In 2005-06, London had the highest expenditure per head at 25% above the average for revenue and 48% for capital. Due to this large variation, most of the other regions are below the national average. The South West had the lowest expenditure per head at -12% below the average for revenue and -20% for capital. (See section 3.4 and section 4.1) Chart K.5a: Revenue and capital expenditure 2005-06 by region, percentage difference from England average 50% 40% 30% 20% 10% 0% -10% -20% North East
North West
Yorkshire East & the Midlands Humber
West Midlands
Revenue expenditure (excluding council housing)
K.5.2
6
East of England
London
South East
South West
Capital expenditure (excluding housing)
Net current expenditure on services was around £1,900 per head in 2005-06. London’s spend was 48% above the England average including 191% above average for transport, 85% above average for police and 96% above average for housing. The East Midlands and South West were 16% and 15% respectively below the England average, also mainly due to the variations in levels of spending on the three services mentioned above.
Local Government Finance in England – Key Facts and Trends
Chart K.5b: Net current expenditure on services per head 2005-06 3,000
2,500
£ per head
2,000
1,500
1,000
500
0 North East
North West
Education
Yorkshire & the Humber
East Midlands
Transport
Cultural, environment & planning
East of England
Social services Police
London
South East
South West
Housing (exc HRA) Fire
Other services
Regional expenditure differences reflect the differences in the amount of central government funding received. Because of its relatively greater needs and higher costs, London receives the highest levels of both formula and specific grants. In comparison, the differences in council tax income between the regions are relatively small, and less than the variation that would be expected if all authorities set the same Band D council tax. (See section 2.4) Chart K.5c: Sources of revenue funding 2005-06 2,500
2,000
£ per head
K.5.3
West Midlands
1,500
1,000
500
0 North East
North West
Yorkshire & the Humber Council Tax
East Midlands
West Midlands
East of England
Formula grant
London
South East
South West
Specific grant
7
Local Government Financial Statistics England No.17 2007
K.5.4
Because of regional differences in house prices, there is a big difference in the proportion of properties in the different council tax bands in each region. In the North East, 86% of all properties are in Bands A to C, whereas in London the figure is only 44%. However the variation in council tax yield is less than this disparity in bands would suggest, as regions with low value properties tend to have a higher average Band D council tax. (See section 2.2) Chart K.5d: Council tax – Band D levels and percentage of properties in Bands A to C 2006-07
Average Band D council tax
90%
£1,200
80% £1,000
70% 60%
£800
50% £600
40% 30%
£400
20% £200
10%
£0
0% North East
North West
Yorkshire East West East of & the Midlands Midlands England Humber
Band D council tax
8
London
% Bands A to C
South East
South West
% of properties in Bands A to C
100%
£1,400
Local government finance in England K.1 Overview K.1.1
In England, local authorities’ total expenditure was £141 billion in 2005-06 compared with £130 billion in 2004-05 and £122 billion in 2003-04. After deducting non-grant income, the overall cost to the central and local taxpayer of local authority services works out at around £115 billion, or £2,300 per head in 2005-06. (See section 1.6)
£ billion
Chart K.1a: Local authority gross income and expenditure 2005-06 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0
Trading services £1bn Housing Revenue Account £7bn Capital grants & receipts £9bn Other £10bn Sales, fees & charges £11bn Grants outside AEF £15bn
Trading services £1bn Housing Revenue Account £4bn Capital £17bn Interest £3bn
Running expenses £61bn
Revenue grants £64bn Employees £56bn Council tax £21bn Income
Expenditure
K.2 The pattern of spending K.2.1
In 2005-06, net current expenditure (See section 3.2) on general services was £97.2 billion. Total capital expenditure was £16.6 billion. (See section 4.1)
1
Local Government Financial Statistics England No.17 2007
Chart K.2a: Expenditure on services 2005-06 40 35
£ billion
30 25 20 15 10 5 0 Education
Highways Social services and transport
Housing
Net current expenditure
K.2.2
Police
Fire
Other services
Capital expenditure
Comparisons of service expenditure over time are affected by changes in local government responsibilities. After adjusting for the expenditure of former grant maintained schools, net current expenditure on education increased by about 33% in real terms between 2000-01 and 2005-06. Other Services have increased by 43% over the same period, mainly due to Highways and Transport and Non-HRA housing. (See section 3.5) Chart K.2b: Net current expenditure by service 2000-01 to 2006-07 real terms, 2005-06 prices
100
£ billion
80
60
40
20
0 2000-01 Education
K.2.3
2
2001-02
2002-03 Social services
2003-04
2004-05
2005-06
2006-07
Other services
Capital expenditure on education and transport has more than doubled in real terms between 2000-01 and 2005-06. Capital expenditure on housing has increased at a lower rate of 43% during the same period and other services at 90%. (See section 4.1)
Local Government Finance in England – Key Facts and Trends
Chart K.2c: Total capital expenditure by service 2000-01 to 2006-07 real terms, 2005-06 prices
20
£ billion
15
10
5
0 2000-01 Education
2001-02
2002-03 Transport
2003-04
2004-05
Housing
2005-06
2006-07
Other services
K.3 Balance of funding About 61% of local authorities’ gross income in 2005-06 came from central government, and the remaining 39% from local sources, including council tax, charges, rents and capital receipts. (See section 2.1) Using a narrower definition, 75% of revenue expenditure was funded from government grant in 2005-06, and 25% from local taxes. The locally-funded percentage increased slightly after the introduction of the council tax in 1993-94, but it has remained very stable since 1998-99 (See section 3.5) Chart K.3a: Sources of revenue funding 1993-94 to 2006-07 real terms, 2005–06 prices 50 45 40 35 30 25 20 15 10 5 0 19 93 -9 4 19 94 -9 5 19 95 -9 6 19 96 -9 7 19 97 -9 8 19 98 -9 9 19 99 -0 0 20 00 -0 1 20 01 -0 2 20 02 -0 3 20 03 -0 4 20 04 -0 5 20 05 -0 6 20 06 -0 7
£ billion
K.3.1
Government grants
Business rates
Council tax
3
Local Government Financial Statistics England No.17 2007
Chart K.3b: Balance of funding 1993-94 to 2006-07 Percentage of revenue expenditure locally funded 30%
25%
20%
15%
10%
5%
7
6
-0 06 20
20
05
-0 04
-0
5
4 -0 20
03
-0
3 20
2 20
02
-0
1
01 20
-0
0
00
-0
20
-9
9 19 99
8 98 19
-9
97 19
96 19
-9
7
6 -9 95
-9
5 19
94 19
19
93
-9
4
0%
K.4 Council tax K.4.1
Council tax raised £22.5 billion in 2006-07, around £3 billion of which was funded by means-tested council tax benefit. Since the introduction of council tax in 1993-94, council tax bills have increased by 123%, more than three times the rate of inflation, and almost double the increase in average earnings. (See section 2.2) Table K.4a: Annual increases in average Band D council tax
4
% increase
real terms % increase
1994-95
2.1
-0.4
1995-96
5.0
1.6
1996-97
6.1
3.6
1997-98
6.5
4.0
1998-99
8.6
4.4
1999-00
6.8
5.1
2000-01
6.1
3.1
2001-02
6.4
4.5
2002-03
8.2
6.7
2003-04
12.9
9.5
2004-05
5.9
3.3
2005-06
4.1
0.8
2006-07
4.5
1.9
Local Government Finance in England – Key Facts and Trends
Chart K.4b: Cumulative increase in council tax, retail prices and average earnings since 1993-94 140%
Percentage increase
120% 100% 80% 60% 40% 20% 0%
1
3 99
4 -9 1
4 99
6
5 -9
-9
5 99
1
Council tax
7 -9
98
799
1
00
9
-9
8 99
1
1
999
2
Retail Price Index
03
2
1
-0
-0
0 00
2
1 00
2
200
2
3 00
-0
4
5
-0
4 00
2
2
500
06
7
-0
6 00
2
Average earnings
Since 1993-94, the percentage of council tax collected in-year in England has improved steadily until, in 2005-06, authorities collected 96.8% of council tax collectable in-year. The biggest improvement has been made in the collection rate of Inner London boroughs which collected 93.9% of council tax in 2005-06 as opposed to 76.0% in 1993-94. (See section 2.2) Chart K.4c: Council tax collection rates 1993-94 to 2005-06 100
95 90
85 80
75 0 19 93 -9 4 19 94 -9 5 19 95 -9 6 19 96 -9 7 19 97 -9 8 19 98 -9 9 19 99 -0 0 20 00 -0 1 20 01 -0 2 20 02 -0 3 20 03 -0 4 20 04 -0 5 20 05 -0 6
% council tax collected in year
K.4.2
1
6 99
All England Unitary authorities
Outer London
Inner London
Metropolitan districts
Shire districts
5
Local Government Financial Statistics England No.17 2007
K.5 Regional variations K.5.1
In 2005-06, London had the highest expenditure per head at 25% above the average for revenue and 48% for capital. Due to this large variation, most of the other regions are below the national average. The South West had the lowest expenditure per head at -12% below the average for revenue and -20% for capital. (See section 3.4 and section 4.1) Chart K.5a: Revenue and capital expenditure 2005-06 by region, percentage difference from England average 50% 40% 30% 20% 10% 0% -10% -20% North East
North West
Yorkshire East & the Midlands Humber
West Midlands
Revenue expenditure (excluding council housing)
K.5.2
6
East of England
London
South East
South West
Capital expenditure (excluding housing)
Net current expenditure on services was around £1,900 per head in 2005-06. London’s spend was 48% above the England average including 191% above average for transport, 85% above average for police and 96% above average for housing. The East Midlands and South West were 16% and 15% respectively below the England average, also mainly due to the variations in levels of spending on the three services mentioned above.
Local Government Finance in England – Key Facts and Trends
Chart K.5b: Net current expenditure on services per head 2005-06 3,000
2,500
£ per head
2,000
1,500
1,000
500
0 North East
North West
Education
Yorkshire & the Humber
East Midlands
Transport
Cultural, environment & planning
East of England
Social services Police
London
South East
South West
Housing (exc HRA) Fire
Other services
Regional expenditure differences reflect the differences in the amount of central government funding received. Because of its relatively greater needs and higher costs, London receives the highest levels of both formula and specific grants. In comparison, the differences in council tax income between the regions are relatively small, and less than the variation that would be expected if all authorities set the same Band D council tax. (See section 2.4) Chart K.5c: Sources of revenue funding 2005-06 2,500
2,000
£ per head
K.5.3
West Midlands
1,500
1,000
500
0 North East
North West
Yorkshire & the Humber Council Tax
East Midlands
West Midlands
East of England
Formula grant
London
South East
South West
Specific grant
7
Local Government Financial Statistics England No.17 2007
K.5.4
Because of regional differences in house prices, there is a big difference in the proportion of properties in the different council tax bands in each region. In the North East, 86% of all properties are in Bands A to C, whereas in London the figure is only 44%. However the variation in council tax yield is less than this disparity in bands would suggest, as regions with low value properties tend to have a higher average Band D council tax. (See section 2.2) Chart K.5d: Council tax – Band D levels and percentage of properties in Bands A to C 2006-07
Average Band D council tax
90%
£1,200
80% £1,000
70% 60%
£800
50% £600
40% 30%
£400
20% £200
10%
£0
0% North East
North West
Yorkshire East West East of & the Midlands Midlands England Humber
Band D council tax
8
London
% Bands A to C
South East
South West
% of properties in Bands A to C
100%
£1,400
