Transfer Power

This is a living document, and we need your help to make it better. Please leave any comments or sources of further evidence at the bottom of the page. This is version 1 - published on 15th July 2010.

What's the policy?

Transfer power from central to local government

"We will promote the radical devolution of power and greater financial autonomy to local government, including a full review of local government finance.
We will give councils a general power of competence.
We will abolish Regional Spatial Strategies and return decision-making powers on housing and planning to local councils." (Building the Big Society, Cabinet Office)

What's the evidence?

1a. How is local government financed?

The latest Local Government Financial Statistics report released on 25 June 2010 shows that in England local authorities' total expenditure, which represents about a quarter (26%) of all public expenditure, was £160 billion in 2008-09. About 60% of local authorities' gross income in 2008-09 came from central government (through revenue and capital grants or re-distributed non-domestic rates). The remaining 40% came from local sources including council tax, sales, fees and charges, council rents and capital receipts. In 2008-09, net current expenditure on general services was £113.1billion. Total capital expenditure was £19.8 billion. The largest share of net current expenditure in 2008-09 was on education services with 37% of the total. Social services accounted for a further 17%, housing (excluding Housing Revenue Account) 15% and police 10%. Longer-term trends in local authority revenue expenditure and how it has been financed since 1993-94 are shown in the table below:

Local Government finance since 1993-94 (£ billion)

chart?chxl=0:|1994|2009&chxr=1,0,51688&c

Source: Communities and Local Government

1b. How will the cuts in public spending affect local government finance?

On 10 June 2010, it was announced that local government grants would be reduced by approximately £1.2 billion, of which £359 million will come from the local Communities and Local Government Department, £311 million from the Department of Education and £309 million from the Department of Transport. It was also announced that government would be reducing revenue and capital non-schools ring-fencing this year from 10.7% (£4.5bn) to 7.7% (£3.2bn) to enable councils more flexibility and freedom over decisions on spending priorities and on where funding cuts might be implemented.

1c. How will this impact on the voluntary and community sector?

According to Office of the Third Sector’s National Survey of Third Sector Organisations nearly a third (32%) of voluntary and community organisations receive funding from local government. The report The State and the Voluntary Sector estimates that the income from local government provides the largest source of statutory income (47%) to the UK voluntary sector, so cuts in local authorities' budgets are most certainly going to impact on voluntary and community organisations. NCVO's 'crowdsourcing the cuts' spreadsheet shows that some voluntary and community organisations are already experiencing cuts by their local authority. The impact will be felt more severely in deprived areas as the National Survey of Third Sector Organisations shows that voluntary and community organisations located in the most deprived areas are the ones most likely to be the recipients of local government funding.

Statutory funding of the UK voluntary sector

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Source: NCVO - UK Civil Society Almanac 2010

What are the potential challenges and opportunities?

Opportunities

Devolving power to the local level will help strengthen local democracy.
Strengthening the powers of local authorities should enable them to better respond to local needs. Voluntary and community organisations can help ensure that the full range of voices in the community are heard.

Challenges

Local authorities will need to review their spending priorities in view of the cuts that have been announced. Will they be able to meet their statutory obligations and continue funding the work of voluntary and community organisations with longer-term and softer outcomes?
Many voluntary and community organisations that have spent much time and energy engaging with existing governance structures and building strategic relationships at local and regional levels may need to start again.
Greater decentralisation may lead to greater differences between the levels of service provision available in different areas.