Finances - how councils are financed

Local government financing is a combination of three factors: Council Tax, non-domestic taxes and a block grant from government.

  1. The council tax system was introduced on 1 April 1993 to replace the community charge (poll tax) system which began on 1 April 1990. Unlike the community charge system, which operated on a per head basis, the amount of council tax payable depends in part upon the valuation band into which properties are placed. In 1999/2000 this accounted for 19% of local government finance.
  2. People who occupy non-domestic properties (such as shops, factories, offices and warehouses) do not pay Council Tax on those properties. Instead they pay business rates - otherwise known as National Non-Domestic Rates. One council in each area collects business rates and pays them into a national 'pool' which the Government then shares out between all authorities. This accounts for 41% of finance.
  3. Local government is also financed in the form of grants from government. To work out each council's share the Government takes account of the population, social structure and other characteristics of each authority. This account for 40% of finance.

The Government (in consultation with local government) has developed separate formulas covering the following major service areas:

  • Education
  • Personal social services
  • Police
  • Fire
  • Highway maintenance
  • Environmental, protective and cultural services
  • Capital financing

Our long term financial plans are set out in our Medium Term Financial Strategy.  This is a 'live' document, which is updated to reflect current trends.  It's reported back to the Executive regularly throughot the year.  You can find the latest versions of this in the Executive meeting agendas.  Just click on the Executive meetings in the Committee Schedule.

Each February, at a Full Council meeting, we make a decision on the budget for the following financial year, including any changes to Council Tax.  You can read details of the 2018/19 budget in the agenda for this meeting.  As part of the development of our budget we ask for views on our budget proposals each year.  This usually happens in December or January.

The Council formulates its budgets plan in the context of a medium term financial strategy. This strategy sets out broad forecasts of income and expenditure over a 10 year period so that the longer term impacts of funding changes and decisions such as council tax levels are clearly understood. The strategy is usually updated in September each year.