How local authorities are funded

Sources of funding

The services delivered by local authoroties are financed through a number of different sources, including:

Charges for goods and service

Although most services provided by local authorities are free, there are some services that come with charges. This money in turn helps to fund the upkeep of the services the local authority provides. 

Examples of charges include:

• Housing rents
• Parking charges
• Planning application fees

Local Government Fund (LGF)

The LGF is a central fund that partially funds the work of local authorities. This fund comes from three primary sources:

• Local property tax revenues
• Motor tax revenues
• Payments from the Exchequer (the Government’s central fund)

State funding and programmes

Given the broad range of services provided by local authorities, the work of local government often overlaps with the work of a number of different government departments. Many departments make funding available to local authorities to deliver schemes or services such as the development of housing or road maintenance. 

Commercial rates

Local authorities collect a payment called commercial rates on commercial properties (properties intended for business use). 

The money generated from commercial rates goes towards the running of day-to-day services provided by the local authority, including street lighting, street cleaning, footpath and road maintenance, public parks and spaces, environmental protection, libraries, fire services, and more. 

To find out more about commercial rates see the Business and Economy page in our services section.

Local authority budgets

Each year, an annual budget is prepared for each local authority outlining current expenditure (how much money is being spent on the day-to-day running of the local authority) and income from the various sources outlined above. 

Each local authority determines what their spending priorities are based on the needs of the local area and the resources available. The elected council must vote to adopt the annual budget each year. 

The annual budget for your local authority can be found on your local authority website.

Audit committees

Each local authority has an independent audit committee, whose role is to advise the council on their financial reporting, risk management, and their governance procedures. By law, the functions of the audit committee are to:

• Review financial and budgetary reporting practices and procedures.
• Review audited financial statements or audit reports to assess what actions have been taken by the chief executive in response to those reports.
• Promote efficiency and value for money in the local authority.
• Review the systems in place for managing risk.
• Encourage best practice in the internal audit function of the local authority.

This increases accountability and improves efficiency within the local authority.