Local government powers and finance
Local authorities have a wide range of powers and duties. National policy is set by central government, but local councils are responsible for all day-to-day services and local matters. They are funded by government grants, Council Tax and business rates.
Powers and duties
Local authorities work within the powers laid down under various Acts of Parliament. Their functions are far-reaching. Some are mandatory, which means that the authority must do what is required by law. Others are discretionary, allowing an authority to provide services if it wishes.
In certain cases, ministers have powers to ensure consistent standards to safeguard public health or to protect the rights of individual citizens. Where local authorities exceed their statutory powers, they are regarded as acting outside the law and can be challenged in court.
Central and local government
The main link between local authorities and central government in England is the Communities and Local Government department. It is responsible for national policy on how local government is set up, what it does, how well it works, and how it is funded.
Other central government departments deal with national policy on local services, in particular:
- Department for Children, Schools and Families
- Department for Culture, Media and Sport
- Department for Environment, Food and Rural Affairs
- Department of Health
- Department for Transport
In Scotland, Wales and Northern Ireland, local authorities now work mainly with the devolved governments.
How local government is financed
Local government spending is about a quarter of all public spending in the UK. Local authorities are funded by a combination of grants from central government, Council Tax and business rates.
In Northern Ireland, district councils still raise money through a domestic rate and a business rate.
Central government (or the devolved government in Scotland, Wales and Northern Ireland) provides specific and general grants to enable local authorities to deliver all the necessary services.
To divide up the funding, the government uses a system that takes into account the number and value of properties in each area, and how much it costs to provide services there.
Council Tax provides about a quarter of local funding. Local authorities set the total Council Tax they need to raise, based on their overall budget for the year. Each household pays an amount depending on the value of their home.
The government has powers to ensure that increases in local authority budgets and Council Tax are not excessive.
Business rates are a property tax on businesses and other non-domestic properties. Their formal name is national non-domestic rates.
The national rates are set by central government. The revenue is collected by local authorities, pooled by central government, and then redistributed to local authorities.
- Council Tax (home and community section)
Auditing of accounts
Local authorities' annual accounts must be audited by independent auditors appointed by the Audit Commission in England and Wales, or in Scotland by the Accounts Commission for Scotland. In Northern Ireland, the chief local government auditor carries out this role.
Local electors have a right to inspect the accounts to be audited. They may also ask questions and lodge objections with the auditor.
Find your local council
You can find out more about your local authority, and the services it provides, from its website.
- Find your local council (directories section)
- A-Z of Local Directgov services (do it online section)
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