Finance is one of the key resources available to local authorities for use in providing their services and for meeting their statutory obligations to their residents. Other resources include staff, systems, property/buildings and information. Finance is the resource that allows all the other resources to be secured and as such managing it becomes a very important activity to ensure an efficient use of all resources. Finance also becomes important to local authorities because it represents public money entrusted to them and therefore requires statutory accountability on the part of chief officers of the use of this money.
About 75% of Local Authorities’ funding comes from central government in the form of revenue support grants. The remaining balance comes directly from council tax on residents. Central Government’s funding to local authorities represents about 25% of public expenditure in the UK. Although Council tax forms only about 4% of UK the national tax revenue, their impact on the public is very visible as they are seen as an additional tax burden.
In the UK, Central Government through Parliament exercises the overall control over public expenditure to ensure that resources are directed and used effectively within the overall economy, This includes the funding it gives to local authorities yearly and the revenues they collect from local taxpayers in the form of council tax. Central government is able to control local government expenditure by limiting the grants it gives to them, by applying pressure over council tax increases and by legal limitations on what local authorities can do. Local authorities must therefore organize their affairs efficiently to ensure that resources they use are within government constraints. The budgetary process is one of the ways of ensuring that this is achieved.
Local authorities generally use their resources to provide services to...