Local government finance in England
TRENDS IN LOCAL GOVERNMENT FINANCE
Local government finance in England K.1 Overview •
Setting out local government expenditure and income in context, local government accounts for 27% of the UK public sector as a whole (see section 1.5).
Chart K.1a: Local government expenditure in Total Managed Expenditure, UK 2006-07 Public corporations 1%
Local government 27%
Central government 72%
Source: Office for National Statistics
Total managed expenditure has been derived using the National Accounts definition
•
In England, local authorities’ total expenditure was £144 bn in 2006-07 compared with £139 bn in 2005-06 and £128 bn in 2004-05.
•
After deducting non-grant income, the overall cost to the central and local taxpayer of local authority services works out at around £117 bn, or £2,300 per head in 2006-07 (see section 1.6).
1
Local Government Financial Statistics England No.18 2008
Chart K.1b: Local authority gross income and expenditure 2006-07 150
Specific government grants outside AEF £13bn
140
TOTAL EXPENDITURE £144.3bn
130
120 Employees £58.6bn Specific government grants inside AEF £41.8bn
110
£ billion
80
General fund revenue
90
General fund revenue
100
Revenue support grant £3.4bn
Resdistributed NNDR £17.5bn
70 Police grant £3.9bn Running expenses £60.5bn 60 Council tax £19.2bn 50 Council tax benefit grant £3.3bn 40
Sales, fees and charges £10.8bn
30
10
0
Capital
HRA
20
Rents £6.2bn
Capital grants £5.4bn Capital receipts £3.7bn Met from financing movements £3.5bn Income
Trading services £0.8bn Government subsidies & other income £0.8bn External trading service revenue accounts £1.1bn Capitalised revenue expenditure & pooling of housing capital receipts £1bn
Total expenditure has been calculated as shown in table 1.6b
2
Housing revenue account £4.4bn Interest £2.8bn
Capital £16.3bn
Expenditure
Capital
Other income £10.8bn
Local Government Finance in England
K.2 The pattern of spending •
In 2006-07, net current expenditure (see section 3.2) on general services was £103.5bn. Total capital expenditure was £16.3bn (see section 4.1).
Chart K.2a: Expenditure on services 2006-07 40 35
£ billion
30 25 20 15 10 5 0 Education
Highways and transport
Social services
Housing
Net current expenditure
•
Police
Fire and rescue
Other services
Capital expenditure
Local government is collectively one of the largest employers in England, employing 1.7m full time equivalent staff (FTEs). The majority of these are in administration and other support services (see section 6.3). In 2006-07, local government employee expenditure accounted for 51% of all local government service expenditure (gross of income) and was the single largest area of spending for local government (see section 6.2).
Chart K.2b: Employee expenditure by service 2006-07 Other services 17%
Fire and rescue 3%
Education 49% Police 17%
Housing 1% Social services 11%
Highways and transport 2%
3
Local Government Financial Statistics England No.18 2008
Chart K.2c: Employee expenditure as a proportion of service expenditure for 2006-07 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Education services
•
Highways, roads and transport services
Social services
Housing services
Police services
Fire and rescue services
Other services
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 27% in real terms between 2001-02 and 2006-07. Other services have increased by 44% over the same period, mainly owing to fire and rescue and non-HRA housing (see section 3.5).
Chart K.2d: Net current expenditure by service 2001-02 to 2007-08 real terms, 2006-07 prices
110
110 100
90
90
80
80
70
70
60
60
50
50
£ billion
100
40
40
30
30
20
20
10
10
0
0 2001-02
2002-03
2003-04
Education
•
4
2004-05 Social services
2005-06
2006-07 2007-08 Budget Other services
In real terms, capital spending increased by 46% between 2001-02 and 2006-07. During this period, capital expenditure on transport has increased by 62%, on other services by 58%, on education by 46% and on housing by 27% (see section 4.1).
Local Government Finance in England
Chart K.2e: Total capital expenditure by service 2001-02 to 2007-08 real terms, 2006-07 prices
£ billion
25
25
20
20
15
15
10
10
5
5
0
0 2001-02
2002-03
Education
2003-04
2004-05
Transport
2005-06 Housing
2006-07
2007-08 (F)
Other services
K.3 Balance of funding •
About 61% of local authorities’ gross income in 2006-07 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 2006-07, and 25% from local taxes. The locally-funded percentage increased slightly after the introduction of council tax in 1993-94, but it has remained broadly stable since 1998-99 (see section 3.2).
Chart K.3a: Source of local authority income (at 2006-07 prices) 100
90
90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
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 20 07 -0 8
£ billion
100
Council tax
Redistributed non-domestic rates
Government grants
5
Local Government Financial Statistics England No.18 2008
K.4 Council tax •
Council tax requirement was £23.6bn in 2007-08, around £3.5bn of which was expected to be funded by council tax benefit. Since the introduction of council tax in 1993-94 average Band D council tax bills have increased by 133%, almost 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
% 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
2007-08
4.2
-0.3
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%
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 20 07 -0 8
94 -9 19
19
93 -9
4
0%
Council tax
6
RPI
Average earnings
Local Government Finance in England
•
Since 1993-94, the percentage of council tax collected in-year in England has improved steadily until, in 2006-07, authorities collected 96.9% of council tax collectable in-year. The biggest improvement has been made in the collection rate of Inner London boroughs which collected 94.1% of council tax in 2006-07 as opposed to 76.0% in 1993-94 (see section 2.2).
Chart K.4c: Council tax collection rates 1993-94 to 2006-07
95 90 85 80
75
All England Unitary authorities
-0
7 06 20
05 20
-0
6
5 -0
4
04
-0
-0
03 20
02 20
Outer London
20
3
2 -0
1
01 20
00
-0
0 -0
Inner London
20
9 -9
99 19
8
98 19
-9 97 19
96
-9
-9
6 19
5 -9
95 19
4 -9
94 19
93
7
70 19
% council tax collected in year
100
Metropolitan districts
Shire districts
7
Local Government Financial Statistics England No.18 2008
K.5 Regional variations •
In 2006-07, London had the highest expenditure per head at 41% above the average for revenue and 60% for capital. Due to this large variation, most of the other regions are below the national average. The East of England had the lowest expenditure per head at 14% below the average for revenue and South East the lowest for capital at 23% below the average (see section 3.3 and section 4.1).
Chart K.5a: Revenue and capital expenditure per head 2006-07 by region, percentage difference from England average 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% North East
North West
Yorkshire & East the Humber Midlands
West Midlands
Revenue expenditure (excluding council housing)
•
8
East of England
London
South East
South West
Capital expenditure (excluding housing)
Net current expenditure on services was around £2,000 per head in 2006-07. London’s spend was 48% above the England average including 182% above average for transport, 84% above average for police and 95% above average for housing. The East of England, South East, South West and East Midlands were all broadly around 15% below the England average. This was mainly due to the variations in levels of spending on the three services mentioned above.
Local Government Finance in England
Chart K.5b: Net current expenditure on services per head 2006-07 3,500 3,000
£ per head
2,500 2,000 1,500 1,000 500 0 North East
North West
Education
Yorkshire & the Humber
East Midlands
Transport
Cultural, environment & planning
•
West Midlands
East of England
Social services Police
London
South East
South West
Housing (exc HRA) Fire & rescue
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 grant and specific grants inside AEF. 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 per head 2006-07 2500
£ per head
2000
1500
1000
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
9
Local Government Financial Statistics England No.18 2008
•
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% (see section 2.2).
Chart K.5d: Council tax – percentage of dwellings in Bands A to H 2007-08 100%
Percentage of dwelling
80%
60%
40%
20%
0% North East
North West
Yorkshire & the Humber
East Midlands
West Midlands
East of England
London
South East
Region Band A–C
10
Band D
Bands E–H
South West
Local government finance in England K.1 Overview •
Setting out local government expenditure and income in context, local government accounts for 27% of the UK public sector as a whole (see section 1.5).
Chart K.1a: Local government expenditure in Total Managed Expenditure, UK 2006-07 Public corporations 1%
Local government 27%
Central government 72%
Source: Office for National Statistics
Total managed expenditure has been derived using the National Accounts definition
•
In England, local authorities’ total expenditure was £144 bn in 2006-07 compared with £139 bn in 2005-06 and £128 bn in 2004-05.
•
After deducting non-grant income, the overall cost to the central and local taxpayer of local authority services works out at around £117 bn, or £2,300 per head in 2006-07 (see section 1.6).
1
Local Government Financial Statistics England No.18 2008
Chart K.1b: Local authority gross income and expenditure 2006-07 150
Specific government grants outside AEF £13bn
140
TOTAL EXPENDITURE £144.3bn
130
120 Employees £58.6bn Specific government grants inside AEF £41.8bn
110
£ billion
80
General fund revenue
90
General fund revenue
100
Revenue support grant £3.4bn
Resdistributed NNDR £17.5bn
70 Police grant £3.9bn Running expenses £60.5bn 60 Council tax £19.2bn 50 Council tax benefit grant £3.3bn 40
Sales, fees and charges £10.8bn
30
10
0
Capital
HRA
20
Rents £6.2bn
Capital grants £5.4bn Capital receipts £3.7bn Met from financing movements £3.5bn Income
Trading services £0.8bn Government subsidies & other income £0.8bn External trading service revenue accounts £1.1bn Capitalised revenue expenditure & pooling of housing capital receipts £1bn
Total expenditure has been calculated as shown in table 1.6b
2
Housing revenue account £4.4bn Interest £2.8bn
Capital £16.3bn
Expenditure
Capital
Other income £10.8bn
Local Government Finance in England
K.2 The pattern of spending •
In 2006-07, net current expenditure (see section 3.2) on general services was £103.5bn. Total capital expenditure was £16.3bn (see section 4.1).
Chart K.2a: Expenditure on services 2006-07 40 35
£ billion
30 25 20 15 10 5 0 Education
Highways and transport
Social services
Housing
Net current expenditure
•
Police
Fire and rescue
Other services
Capital expenditure
Local government is collectively one of the largest employers in England, employing 1.7m full time equivalent staff (FTEs). The majority of these are in administration and other support services (see section 6.3). In 2006-07, local government employee expenditure accounted for 51% of all local government service expenditure (gross of income) and was the single largest area of spending for local government (see section 6.2).
Chart K.2b: Employee expenditure by service 2006-07 Other services 17%
Fire and rescue 3%
Education 49% Police 17%
Housing 1% Social services 11%
Highways and transport 2%
3
Local Government Financial Statistics England No.18 2008
Chart K.2c: Employee expenditure as a proportion of service expenditure for 2006-07 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Education services
•
Highways, roads and transport services
Social services
Housing services
Police services
Fire and rescue services
Other services
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 27% in real terms between 2001-02 and 2006-07. Other services have increased by 44% over the same period, mainly owing to fire and rescue and non-HRA housing (see section 3.5).
Chart K.2d: Net current expenditure by service 2001-02 to 2007-08 real terms, 2006-07 prices
110
110 100
90
90
80
80
70
70
60
60
50
50
£ billion
100
40
40
30
30
20
20
10
10
0
0 2001-02
2002-03
2003-04
Education
•
4
2004-05 Social services
2005-06
2006-07 2007-08 Budget Other services
In real terms, capital spending increased by 46% between 2001-02 and 2006-07. During this period, capital expenditure on transport has increased by 62%, on other services by 58%, on education by 46% and on housing by 27% (see section 4.1).
Local Government Finance in England
Chart K.2e: Total capital expenditure by service 2001-02 to 2007-08 real terms, 2006-07 prices
£ billion
25
25
20
20
15
15
10
10
5
5
0
0 2001-02
2002-03
Education
2003-04
2004-05
Transport
2005-06 Housing
2006-07
2007-08 (F)
Other services
K.3 Balance of funding •
About 61% of local authorities’ gross income in 2006-07 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 2006-07, and 25% from local taxes. The locally-funded percentage increased slightly after the introduction of council tax in 1993-94, but it has remained broadly stable since 1998-99 (see section 3.2).
Chart K.3a: Source of local authority income (at 2006-07 prices) 100
90
90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
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 20 07 -0 8
£ billion
100
Council tax
Redistributed non-domestic rates
Government grants
5
Local Government Financial Statistics England No.18 2008
K.4 Council tax •
Council tax requirement was £23.6bn in 2007-08, around £3.5bn of which was expected to be funded by council tax benefit. Since the introduction of council tax in 1993-94 average Band D council tax bills have increased by 133%, almost 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
% 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
2007-08
4.2
-0.3
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%
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 20 07 -0 8
94 -9 19
19
93 -9
4
0%
Council tax
6
RPI
Average earnings
Local Government Finance in England
•
Since 1993-94, the percentage of council tax collected in-year in England has improved steadily until, in 2006-07, authorities collected 96.9% of council tax collectable in-year. The biggest improvement has been made in the collection rate of Inner London boroughs which collected 94.1% of council tax in 2006-07 as opposed to 76.0% in 1993-94 (see section 2.2).
Chart K.4c: Council tax collection rates 1993-94 to 2006-07
95 90 85 80
75
All England Unitary authorities
-0
7 06 20
05 20
-0
6
5 -0
4
04
-0
-0
03 20
02 20
Outer London
20
3
2 -0
1
01 20
00
-0
0 -0
Inner London
20
9 -9
99 19
8
98 19
-9 97 19
96
-9
-9
6 19
5 -9
95 19
4 -9
94 19
93
7
70 19
% council tax collected in year
100
Metropolitan districts
Shire districts
7
Local Government Financial Statistics England No.18 2008
K.5 Regional variations •
In 2006-07, London had the highest expenditure per head at 41% above the average for revenue and 60% for capital. Due to this large variation, most of the other regions are below the national average. The East of England had the lowest expenditure per head at 14% below the average for revenue and South East the lowest for capital at 23% below the average (see section 3.3 and section 4.1).
Chart K.5a: Revenue and capital expenditure per head 2006-07 by region, percentage difference from England average 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% North East
North West
Yorkshire & East the Humber Midlands
West Midlands
Revenue expenditure (excluding council housing)
•
8
East of England
London
South East
South West
Capital expenditure (excluding housing)
Net current expenditure on services was around £2,000 per head in 2006-07. London’s spend was 48% above the England average including 182% above average for transport, 84% above average for police and 95% above average for housing. The East of England, South East, South West and East Midlands were all broadly around 15% below the England average. This was mainly due to the variations in levels of spending on the three services mentioned above.
Local Government Finance in England
Chart K.5b: Net current expenditure on services per head 2006-07 3,500 3,000
£ per head
2,500 2,000 1,500 1,000 500 0 North East
North West
Education
Yorkshire & the Humber
East Midlands
Transport
Cultural, environment & planning
•
West Midlands
East of England
Social services Police
London
South East
South West
Housing (exc HRA) Fire & rescue
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 grant and specific grants inside AEF. 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 per head 2006-07 2500
£ per head
2000
1500
1000
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
9
Local Government Financial Statistics England No.18 2008
•
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% (see section 2.2).
Chart K.5d: Council tax – percentage of dwellings in Bands A to H 2007-08 100%
Percentage of dwelling
80%
60%
40%
20%
0% North East
North West
Yorkshire & the Humber
East Midlands
West Midlands
East of England
London
South East
Region Band A–C
10
Band D
Bands E–H
South West
