Local government finance

This presentation was delivered to the Social Security Advisory Committee in London on 24th July 2019

A presentation on recent trends and the outlook for local government spending. It includes a discussion of local tax devolution options, and the potential impacts of the ongoing Fair Funding Review.

In this article, David Phillips argues that pivotal choices loom on local government funding, but if we don’t address what we expect from our councils we risk a system that fails to meet our objectives.

We are in the midst of major changes to local government funding – both its level and the system for raising and distributing it. This note brings together some of the key findings of our research on this topic and highlights where to find further information.

This month marks six years since councils were given responsibility for designing schemes that help low-income working-age households to pay their council tax, at the same time as central government funding for it was cut. In recently published research, we look at how schemes have changed, and with what effects.

Almost six years since council tax support was localised, research into the design and effects of local schemes reveals three key insights. This article first appeared in Benefit magazine and is reproduced here with full permission.

Years of cuts and rising demands for services like social care mean that council funding in England looks increasingly unsustainable. Is devolving more tax revenues and powers the answer?

Not only has the reduced system of council tax support hit low-paid workers but it has proved remarkably ineffective as a way to raise revenue, say the IFS’ Stuart Adam and Thomas Pope.

The value of the pound has changed a lot over the past three years - making us all a little poorer. Back in December 2015, £1 would buy you about €1.40. Today it will get you nearer €1.14. It has suffered a similar fate against most major currencies, losing about 15% of its value over that time. A big part of the fall occurred literally overnight, once the result of the EU referendum became apparent in the early hours of 24 June 2016. That's a big change, but what does it mean for all of us?

The present system of local government finance isn’t sustainable. Something is going to have to give.

Ahead of a proposed move from 50% to 75% business rates retention in April 2020, the Ministry of Housing, Communities and Local Government is seeking views on its proposals for the reform of certain elements of the business rates retention system in England.

This presentation was given at the launch of the report 'The impact of localised council tax support schemes' on 29 January 2019.

How is local government funding changing? And what might the implications for children's services be? In this presentation for the Office of the Children's Commissioner of England, IFS Associate Director David Phillips looked at the trends in local government spending over time, across the country, and across services, paying particular attention to children's services. He also looked at what funding reforms (such as shifts to funding more services via business rates, and the so-called Fair Funding Review) mean and how they could impact different areas and services.

What does the fiscal and funding outlook for English councils look like? In this presentation for the LGA's annual finance conference, IFS Associate Director David Phillips looked at recent trends, the future outlook, and interactions with funding reforms. It shows that despite the end of overall budget cuts, councils facing both uncertainty about future funding levels and the likelihood that local tax revenues will not keep pace with rising costs. 2019 will be a big year for decisions - with important ramifications for the 2020s and beyond.

Funding from local taxes available in the new local government finance system proposed by the government is unlikely to keep pace with rising spending pressures in coming years.