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The growing crisis in our town halls

Councillors frustrated and demoralised by increasingly centralised local government funding

A new critique of the system of local government finance in England shows how the current regime fails to meet the basic requirements needed of a good local finance system. 

The study, I'm a local councillor, get me out of here! led by Tony Travers, the London School of Economics and Political Science (LSE), is the second part of a joint project by Policy Exchange and nef (the new economics foundation) into the reform of local government finance. 

As part of the report, the authors also set out ten guiding principles upon which a good system of local finance should be based. The report shows that:

  • The current system of central grant allocation is an assault on local democracy to enforce national uniformity:
    - The desire for national uniformity is strangling local autonomy in spending decisions.
    - Central government should focus on tackling extreme differences in local needs and resources not controlling all local government funding.
  • Council Tax is a crude tool - 'One club golf does not work':
    - Local government only has one local tax, Council Tax, at its disposal, and is therefore forced to raise Council Tax to meet increasing costs. This penalises those on low fixed incomes such as pensioners. 
    - A more autonomous and stable system of local government finance requires local authorities to have several locally determined income sources at their disposal.
  • Local authorities don't have the power to raise the money for the services they provide:
    - Local authorities should be raising at least 50 per cent, and ideally 75 per cent, of their income from locally determined sources.

Speaking about the findings, Nicholas Boles, director of Policy Exchange, said: 'Despite numerous reviews and reforms we have continually failed to get the local finance system in England right. The current bias towards central funding and a reliance on a single form of local taxation, is strangling local government. We hope that all political parties will back reforms that will remedy this and give local government the financial freedoms it needs to fully meet local needs.'

Sarah Forster from nef said: 'Greater financial democracy is essential if we are to strengthen local government's ability to deliver appropriate services for local people. Only then will we see greater engagement, confidence and interest in local politics.'


For further information please contact Nicholas Boles, director of Policy Exchange, on 020 7340 2651 or Sarah Forster, programme director, nef, on 0207 820 6300.

Notes to editors:

The study is sponsored by the Local Government Association, The Hadley Trust, The Society of County Treasurers, The Esmée Fairbairn Foundation, and Localis.

Tony Travers, who led the study, is director of the Greater London Group at LSE. For more information, click here| 

24 May 2004