How Local Authorities are Funded
12.23 Local authority funding comes from grants from central Government, redistributed business rates, and local taxation (the Council Tax). The first two of these funding sources forms the Formula Grant, annually allocated to each local authority. However, this excludes targeted or specific grants such as the Dedicated Schools Grant. Every year, in the Local Government Finance Settlement, Formula Grants are calculated and allocated using mathematical formulae that are designed to measure the relative needs and resources of different local authorities. From 2006/07, schools have been directly funded via the Dedicated Schools Grant, therefore Formula Grants are now smaller than in previous years, even though the level of overall funding from central Government grants has increased.
12.24 In 2007/08, about 57% of the budgets (excluding targeted or specific grants) of South West local authorities are provided by Council Tax receipts. Among the nine English regions, this is the second highest proportion, and compares to an average for England of 48%. In effect, this means that South West residents are required to bear a higher proportion of the cost of their local services. This is because the formulae used in the Local Government Finance Settlement assess the resources of the region’s population to be higher than elsewhere, and hence the region's councils can raise more revenue from their 'Council Taxbase'. The taxbase is calculated as the total number of properties in an area, equivalised to Council Tax Band D.
Further information about the Local Government Finance Settlement is available on the Communities and Local Government website: Local Government Finance Settlement 2008/09, which includes the leaflet: A guide to the Local Government Finance Settlement.