Heather Jameson 18 November 2013

Guide to local government finance

Guide to local government finance image

How is local government funded?

Local Government finance can be difficult to comprehend, with a complex system of formulas to dictate the level of funding need for each council, but the basics are relatively simple.

Local authorities are financed through a number of difference sources, but most funding is made up of central grant – including money from business rates – and councils tax.

In addition, councils are increasingly attempting to become more self-sufficient, through their powers to charge for services and trade.

The proportion of grant to council tax varies – called the ‘gearing effect’ – as councils with high deprivation levels and low house prices receive more grant and get less returns from their local taxes. More affluent areas are likely to get less grant, but higher returns from high rate council tax.

Money for councils is broadly split into ‘revenue’ – the money for the day-to-day costs incurred by the council – and ‘capital’ – the money which goes on projects such as buildings, roads and infrastructure.

The annual local government finance settlement puts forward money from the Government and dictates:

· the overall formula grant
· how the grant will be distributed
· ‘top slice’ money – the money ‘sliced out of the grant to give to other organisations, like the Local Government Association

Formula grant is made up of revenue support grant and redistributed business rates – which is also know as the national non-domestic rate - but it doesn’t include specific grant. Nor does it include schools dedicated schools grant, which passes down from the Department for Education, and is largely passported on directly to schools.

The Government’s spending review sets out its spending priorities and where the money – including the grant for local government.

The formula grant is ‘unhypothicated’ – which means it is not ring-fenced for specific projects.

SIGN UP
For your free daily news bulletin
Highways jobs

Senior Product Support Analyst

Essex County Council
£33512 - £39425 per annum + Hybrid Working
*Experience the best of both worlds with our flexible hybrid working arrangements. Enjoy the freedom to work from home while still benefiting from in England, Essex, Chelmsford
Recuriter: Essex County Council

Security Architect

Essex County Council
£60049 - £70645 per annum + Hybrid Working
This is a 12 month fixed term contract or secondment opportunity.*Experience the best of both worlds with our flexible hybrid working arrangements. E England, Essex, Chelmsford
Recuriter: Essex County Council

Control Officer

London Borough of Richmond upon Thames and London Borough of Wandsworth
£37602 - £45564 plus shift and weekend allowance
Are you looking for your next opportunity to work as part of a team in a 24-hour emergency control room covering the Boroughs of Richmond and Wandsworth. To be responsible for receiving and logging calls from the public, outside agencies and partners. Use Wandsworth, London
Recuriter: London Borough of Richmond upon Thames and London Borough of Wandsworth

Senior User Centered Designer

Essex County Council
£60049 - £70645 per annum + Hybrid Working
Interviews will be held on 29th and 30th October 2025.*Experience the best of both worlds with our flexible hybrid working arrangements. Enjoy the fr England, Essex, Chelmsford
Recuriter: Essex County Council

Network and Communications Lead

Essex County Council
£52621 - £61906 per annum + Hybrid working
Interviews will be held W/C 20th October 2025.*Experience the best of both worlds with our flexible hybrid working arrangements. Enjoy the freedom to England, Essex, Chelmsford
Recuriter: Essex County Council
Linkedin Banner