The complexities of local government finance


Alison Scott, Assistant Director, Policy and Technical

To the uninitiated, local government finance is an occasionally complex and often highly technical area. Formed by the cumulative effect of years of changes to its individual parts, even comprehensive reviews, such as the Lyons enquiry, haven’t been able to address the system as a whole.

During a period when local government experienced a general growth in resources, practitioners could be forgiven for not being fully focused on the intricacies of funding and distribution. But now in an era of on-going austerity, when the sector is in the midst of cuts, issues of good public financial management have risen to the fore.

While an improved understanding of the system will not remove the necessity to make efficiencies, it will at least help local authorities understand how they can better manage resources and mitigate the negative impacts of cuts. The council tax freeze grant illustrates how a deeper understanding can lead to different decisions. As local authorities have come to understand the impact of the council tax freeze and the permanent reduction in their resource base, many have undertaken innovative policy decisions to maximise long term resources. 

It is often hard to explain to politicians and the public why a particular local authority is facing the level of cuts it is when the system of funding is so complicated. In order to facilitate better understanding of the issues, CIPFA have re-designed our Introductory Guide to Local Government Finance publication. CIPFA also recognises that practitioners and others involved in the sector may require a more in-depth knowledge; therefore we have also updated A Comprehensive Guide to Local Government Finance.