Local Government Finance

Abstract

The UK is governed by a two-tier system of government: the central government and local government in the form of local authorities (which in tum are subdivided into county, urban and district councils). They are the only political bodies, besides Parliament, that are elected by the people and play an important part in preserving democracy. Local authorities are answerable to the electorate but they are not sovereign bodies – they derive their powers from Parliament. These powers are circumscribed by statutes. The organisation and functions of the local authorities have evolved over the years. Local government in its modem form emerged towards the end of the nineteenth century. The Redcliffe-Maud and Wheatley Royal Commissions led to a further reorganisation of local government in England and Wales. This was carried out in 1974 under the Local Government Act 1972 in England and Wales and the 1973 Act in Scotland, but structural changes in local government were undertaken without providing for changes in the methods of finance. The financial arrangements of the local authorities came increasingly under criticism. Eventually a Committee of Enquiry into Local Government was appointed. Its report on Local Government Finance (Cmnd. 6453, 1976), known as the Layfield Report, was an important study of the problems of Local Government finance which showed a need for the construction of a coherent financial system that would reflect the roles in the public sector of the central and local government.