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Reforming revenues - options for the future financing of local government

The LGA commissioned WPI Economics to carry out a review of the current and alternative sources of local government revenue financing and an assessment of their strengths and weaknesses against the principles set out by the LGA: sufficiency, buoyancy, fairness, efficiency of collection, predictability, transparency and incentive.

The report analyses the options for reforming local government revenue financing. These options sit under three headings:

  • The current system and reforming it. Looking at council tax, business rates and smaller revenue sources (sales, fees and charges, road user charges and workplace parking levies).
  • Making national taxes local. Looking at how some, or all, revenue from existing national taxes – such as Income tax or national insurance – could be assigned to council areas. Or how the control of revenues from existing national taxes could be devolved to council areas, in full or in part.
  • Introducing new local taxes. Looking at how entirely new revenue sources could be implemented by councils, such as a tourist levy or a proportional property tax.

Options for reform under each of the above headings are assessed against a set of principles that the LGA argue should guide the design of local government revenue financing. The reason for assessing reform in this way is to produce, as far as is possible, an objective comparison of the options.

The overarching purpose of the report is to contribute to the debate on a sustainable local government finance system, particularly following the funding announcements and finance reforms announced in the 2021 Budget and Spending Review.

You can download the report below.