Where does the money come from?

Central Government has set up three separate systems to fund the three main areas of local authority spending in England. 

These areas are: 

  • Spending on capital projects such as roads, school buildings or computers.
  • Revenue spending on council housing.
  • Revenue expenditure, mainly on pay and other costs of running services other than council housing. 
Government supports local councils' revenue expenditure through formula grants and ring-fenced grants.

We are funded by Central Government through Formula Grant (which consists of Revenue Support Grant and National Non Domestics Rates), Area Based Grant and Specific Grants, and directly by local people through the council tax.

The Government changed the method it uses to calculate formula grant from the Formula Spending Share(FSS) model. The new system (first used in 2007-08) is based on a series of mathematical calculations that are similar in structure to the FSS and are still designed to reflect the relative needs of authorities providing services.

The grant is adjusted to recognise that different areas have different abilities to raise income locally through council tax. A further adjustment is made to ensure that all authorities are guaranteed a minimum increase year on year.

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