Local Authority Expenditure Research Articles

The 1990 Reform of U.K. Local Authority Finance: An Alternative Analysis: Comment on Bayoumi

TN A RECENT paper, Bayoumi (1991) undertakes a macroeconomic analysis of recent reforms to U.K. local authority finance. In Section I he gives an admirably clear description of the reforms. However, for reasons given below, his empirical analysis of the impact of the change is flawed, and so the results should be treated with some caution. This note describes an alternative way of modeling local authority expenditure decisions that yields different estimates of the likely impact of the reforms. Bayoumi's analysis is based on the insight that the marginal price to the domestic sector of local authority expenditure is proportional to the per capita domestic tax base-or ratable value-in an area. This arises, it is claimed, because of the system of central government grants-in-aid in force in England until the 1990 reforms. Certainly, subject to certain reservations we set out below, this result is true for the years up to 1988/89. However, the fiscal year 1989/90 studied by Bayoumi was anomalous. In that year the Government chose to abandon the matching element of grants-in-aid implicit in the kinked budget constraints described by Bayoumi. Instead, to facilitate transition to the reformed system in 1990, it converted the grant to a lump sum. This had the effect of dramatically altering the marginal price of extra spending in most

Food for Thought: The Audit Commission Study of Environmental Health

In evaluating local authority expenditure, the Audit Commission study of environmental health departments revealed a mismatch between finite resources and competing demands. The Commission offered recommendations and guidance to help the important new powers of the Food Safety Act to be applied successfully.

The Determinants and Efficiency of Local Authority Spending in England

This paper analyzes the efficiency and determinants of local authority expenditure in England during 1989/90. The capitalization of local spending in house prices is used as a test of efficiency, and it is found that local services are in general excessive from this standpoint. The determinants of local government spending are then estimated and local incomes, the tax price faced by the electorate, and local party control are found to be significant. Application of the analysis to the recently introduced local government reforms suggest small effects on the overall level of spending.

The Determinants and Efficiency of Local Authority Spending in England

This paper analyzes the efficiency and determinants of local authority expenditure in England during 1989/90. The capitalization of local spending in house prices is used as a test of efficiency, and it is found that local services are in general excessive from this standpoint. The determinants of local government spending are then estimated and local incomes, the tax price faced by the electorate, and local party control are found to be significant. Application of the analysis to the recently introduced local government reforms suggest small effects on the overall level of spending.

THE EVOLUTION OF THE DISTRICT AUDIT

This paper examines the origins and development of the local authority audit from medieval times to 1933, and briefly reviews later developments. It gives particular attention to the role of the district audit which, as an independent mechanism operating within a centrally established administrative framework, gradually accumulated responsibility for monitoring most aspects of local authority expenditure, which grew from relatively modest amounts to about £5m by the beginning of the nineteenth century and £535m in 1933, which is roughly equivalent to £19.5b in 1990 prices. The paper shows that the government's present objective of greater central control has been a consistent theme over time.

CENTRAL CONTROL OF LOCAL AUTHORITY EXPENDITURE

None of the many interest groups involved with either the determination or the effects of central government control of local authority expenditure can be satisfied with the status quo. The current position almost defies description. This is not surprising since it has been arrived at as a result of many piecemeal and ad hoc changes to an original policy, the goals of which appear to have been rejected by many in both central and local government. Over recent years the details of the government's control of local expenditure have been constantly changing. In order to explain these changes and to examine whether they are part of a logical transition, we need to take stock of where we have come from and to speculate on to where we might be going.

Local Authority Expenditure Reactions to Losses in Grant Aid: The Case of the Metropolitan District Councils

This paper presents the results of an initial investigation into the expenditure responses of a group of local authorities in England to a loss in grant income. The Government has restricted grant aid to local authorities in an attempt to secure restraint in the expenditure of these authorities, but (until recently) local authorities have had the opportunity to make good any loss in grant income by increasing local taxes. A central issue is, then, how much restraint in local authority expenditure is secured by a given reduction in grant aid. Reduction in grant aid is measured in this paper in terms of its impact on the local tax rate (and the average local domestic tax bill) if a local authority is to maintain the real value of its spending. An incremental budgeting type model is developed and the empirical work is concerned with the financial years 1982–1983 and 1984–1985. It is found that in the later year local authorities have been less willing to reduce their expenditure in the face of loss of grant aid. It is also found that the response of the local authorities has become more political in the sense that a statistically significant difference has developed between the responses of Labour and those of non-Labour controlled councils.

Local Authority Spending Cuts and Local Political Control

The aim of this Note is to examine recent local authority expenditure cuts in relation to Saunders's dual-state thesis. Saunders's model has important implications for the long-standing debates on local autonomy from central government and on the party effect in expenditure patterns. The extent to which local political control is a mediating factor in the nature and severity of spending cuts is analysed with reference to a case study of two districts in the Greater Manchester area.

Local authority expenditure targets

(1985). Local authority expenditure targets. Local Government Studies: Vol. 11, No. 4, pp. 21-41.

Public expenditure policies and the public library: changing the rules of the revenue game

The period since 1972 has seen major changes in the administration of local government. During the same time central government has become increasingly concerned about the financing and control of local authority expenditure. The authors argue that while central governments have always sought to control local government expenditure a major shift in the balance of power between central and local government has occurred with the election of an administration ideologically committed to reducing public expenditure and willing to replace exhortation with enforcement. The article reviews some of the major fiscal and administrative changes that have taken place since the early 1970s and discusses the practical, professional and managerial implications of the controversial rate capping legislation.

Marketing the Library Service — Sales and Promotion

States that the present recession and associated government policy on local authority expenditure has hit hard at library services throughout the UK. Proposes that libraries should focus on marketing their services in order to establish their cost‐effectiveness. Looks at the dynamics of marketing: identify your product, identify your market, and bring product and market together. Examines how this can be implemented in the library area to establish the role of the organization and thus its effectiveness. Proposes that the library organization will only survive if it takes into account all these factors.

A Representative Need Index of Local Authority Expenditure in England and Wales 1974/1975–1980/1981

Six main approaches to the determination of the expenditure needs of the local authorities in England and Wales are discussed. A representative needs index is then chosen which is based on multiplying the average local authority service costs by the size of client group and summing over each service group in any authority. This index is estimated for 1974/1975–1980/1981 both for discretionary and for nondiscretionary services. The index is then compared with the grant-related expenditure (GRE) used for rate support grant purposes in 1981/1982. Discrepancies are shown to arise from particular choices of GRE assessment which exclude the large discretionary spending of some large central cities and some Inner London boroughs.

The block (and target) grant system and local authority expenditure— theory and evidence

The block (and target) grant system and local authority expenditure— theory and evidence

Equity, Statistics and the Distribution of the Rate Support Grant

Central government grants finance over sixty per cent of local authority expenditure and one grant in particular, the Rate Support Grant, finances over fifty per cent. Hence the annual distribution of the Rate Support Grant attracts considerable attention on the part of local authorities. However, the trend in shares of grant since local government reorganization, which has increasingly favoured London and the Metropolitan areas at the expense of the shire counties, has provoked considerable controversy. This paper reviews past and present methods used to distribute the Rate Support Grant in the light of this trend and provides, in particular, a critique of the present method with proposals for remedial action. Whilst the statistical aberrations described could be easily remedied, the dispute over the equity of the resulting distribution of the Rate Support Grant will remain unresolved until politicians provide more explicit guidance on the principles upon which the expenditure needs of local authorities are to be assessed.

Book reviews

The Future of Voluntary Organisations Report of the Wolfenden Committee Croom Helm, 1978, pp. 286, £2.95. Rationing Social Services: A Study of Resource Allocation and the Personal Social Services Ken Judge, He'memann, London, 1078, pp. 212, £7.00. Policy Planning and Local Government Robin Hambleton, Hutchinson, 1978, pp. 368, £4.50. Communications between Central and Local Government in the Management of Local Authority Expenditure R. Harris & P. J. Shipp, Institute of Operational Research, 1977, pp. 92, £2.50. The Politics of the Media John Whale, Fontana, 1977, pp. 176, paperback, £1. The Politics of the Judiciary J. A. G. Griffith, Fontana, 1977, pp. 224, £1.35.

Layfield on London

THE problems of local government finance, publicised in the main by householders' vocal resistance to continuously increasing rate demand is neither new nor is it restricted to London. When public resentment flared up after the 1963 revaluation, the then Conservative government appointed a Committee of Inquiry into the Impact of Rates on Households. In its report (Cmnd 2582) the Committee under the chairmanship of Professor (now Sir) R. G. D. Allen drew particular attention to the impact of the revaluation upon central London and its residents. Among other changes since that report appeared, the government has sought to formulate Exchequer aid to local authorities in such a way as to moderate the impact of rapidly rising local authority expenditure upon householders. The policy enjoyed considerable success in keeping rate increases to acceptable levels until the post-1972 inflation. The consequences of rapidly rising prices, coupled with the ill-timed reorganisation of local authorities and the creation of the new water boards in 1974, generated unacceptable increases in householders' rates in many areas of the country. On this particular occasion, due to a virtual overnight change in the distribution of grants by a new Labour government, London came off more lightly than many other areas. Nevertheless, the widespread protests which ensued compelled the government to appoint in June 1974 a new Committee of Inquiry into Local Government Finance under the chairmanship of Mr (now Sir) Frank Layfield, Q.C. Local authorities and their associations welcomed the opportunity to plead their case for a broader financial basis and, among the numerous submissions, was one from the Greater London Council. This article reviews the main financial problems of Greater London as seen through the eyes of its representatives and officials and considers the findings of the Layfield Committee insofar as they relate to the circumstances of Greater London. * Having been·reorganised in 1965 local government in Greater London was spared the disruption which ensued elsewhere in Great Britain upon 1974 re-organisation of local government. Nevertheless, the accelerated pace of inflation after 1972, high rates of interest and rising costs exerted the same impact upon local government finances in Greater London as they did elsewhere in Great Britain. Despite the raising of Exchequer aid to the highest levels ever, i.e. 66.5 per cent of rate and grant-aided expenditure, the financial year 1974-75witnessed son1eremarkably desperate increases in local rates. While the average increase was about 30 per cent, or three times the * Local Government Finance. Report of the Committee of Inquiry (Chairman: Frank Layfield Q.C.). Cmnd. 6453, 1976.494 pages. £5.75.

Local Government Finance: Assessing the Central Governmant's Contribution

SUMMARYIt is widely believed that between 60 to 66 per cent. of local authority expenditure (or income) is met by grants from central government alone. This popularly held view is challenged in this paper through a consideration of the current system of funding. We begin with the rate support grant procedure and identify some common sources of misunderstanding; these concern the definition of the rate support grant itself and the true nature of relevant expenditure. This leads us to examine the question of local authority miscellaneous income from fees, sales, rents and other sources from which we conclude that its contribution is underestimated. However it is general knowledge that besides miscellaneous income local authorities derive their income from two other principal sources namely, government grants and local rates. Accordingly the remainder of the paper examines in turn the contribution of these three sources towards (i) local authority revenue expenditure in respect of rate fund services, (ii) local authority revenue income and (iii) local authority income including both revenue and capital receipts. In no instance does central government's share approach 60 per cent. Thus, it would appear that the contribution of government is being overestimated while that of miscellaneous income underestimated. The implications of this are discussed.

The ‘Burden’ of Domestic Rates

Much criticism of rates has centred around the ‘burden’ of this tax – burden in the sense both of present weight of rates imposed and of the future burden which would have to be imposed if (a) local authority expenditure continues to rise as it has done in the past, and (b) central government grants are restricted to their present level of about sixty per cent of overall local authority expenditure. At present the domestic rate payer pays approximately half the amount raised through the local rate or twenty per cent of the total spent by local authorities. This amount varies from local authority to local authority as does the dependence on central government grants which represents only forty per cent of expenditure in some authorities but ninety per cent in the poorest. The question of overall burden arises to some extent because the yield of rates is large and technically can be increased easily. The only tax yield which exceeds that obtained from the rates is the yield of direct taxes on incomes, and domestic rates share with these taxes the technical feature that they are inescapable and flexible.