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Big ideas

for local government

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We exist to make local democracy around the world collectively stronger, through shared ideas, resources and connections.

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We are valued by more than 35,000

subscribers worldwide. We bring the

insights of our global network to the

challenges we all face.

163 member

organisations

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organisations

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organisations

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organisations

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Bespoke resources with international insights.

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Curated information, analysis and guidance

      • Daily News
      • Policy briefings
      • Case studies

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Connections, ideas and networks

            • Events
            • Research
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SGS ALGA Financial sustainability

(SGS input)

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Financial sustainability in Australian local government (July 2024)

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Over a quarter of all Australian councils experienced low financial sustainability in 2021-22

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Local governments’ growth in per capita expenditure lags that of other tiers of government

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English councils still reeling from a decade of underfunding

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Our 2024 Local Government Finance Survey in England showed near zero confidence in the system

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Multiple crises

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English councils still reeling from a decade of underfunding

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In 2024 more than half of all English councils said they were at risk of going bankrupt in the next five years

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  • Central government grants (reduced by 40% between 09/10 - 19/20)

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  • Council tax now a much bigger part of the pot (was 36% of funding in 2010/11, now 56%)

Changes and reduction in funding sources

  • Spending in services reduced by between 40-70% since 2010

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  • The general purpose Revenue Support Grant fell from £15 billion in 2013/14 to £2 billion in 2022/23

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How have councils responded?

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By pulling all the levers!

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+ 91% of all respondents raising council tax by the maximum

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Section 114 notice

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  • When a council cannot set a balanced budget (legal requirement in the UK)

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  • Birmingham - huge issue with equal pay claims, among other things.

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  • London Borough of Newham?
  • All additional spending ceases

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  • Administrators sent in from Whitehall to determine what is a statutory level of service

  • Max Caller “the Angel of Death”

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International Analysis

5 lessons from around the world

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The research so far…

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Lesson 1: �Constitutional definition of roles

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Article 28 (2): Municipalities must be guaranteed the right to regulate all local affairs on their own responsibility within the limits prescribed by the laws. Within the limits of their functions designated by a law, associations of municipalities shall also have the right of self-government in accordance with the laws. The guarantee of self-government shall extend to the bases of financial autonomy; these bases shall include the right of municipalities to a source of tax revenues based upon economic ability and the right to establish the rates at which these sources shall be taxed.

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(German Basic Law)

Protections through written, legally binding constitution.

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Structures, relationships and responsibilities of LG tend to be stable and understandable

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LG in Australia does not have this

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Statutory protection is key – otherwise agreements can be ignored

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  • Control and flexibility
  • Councils need access to a basket of different options
  • In Australia:
    • Councils raise 80% of their own revenue
    • Of which 38% is through rates
    • User charges and federal/state grants make up the bulk of the rest of council funding

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Lesson 2: �Revenue raising and spending options

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Lesson 3: �The ‘bottom-up’ approach

  • Principle of ‘subsidiarity’ - everything should be done at the most local level, and only passed up to the next tier of government if it cannot be achieved at a more local level
  • In Australia powers/responsibilities/size/structure are determined by state governments, with no constitutionally defined role for local government at the federal level (similar to the UK).
  • Verity House Agreement attempted to amend this in Scotland: ‘both parties agree the maxim “local by default, national by agreement”.
  • In other countries, this principle has constitutional protection

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Lesson 4: �Territorial equalisation

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  • Needs-based redistribution of funds.
  • Legally enshrined ways to share money from places that have it to places that need it.
  • Recognises differences in economic development and the gap between what a place can ‘earn’ and what it needs.

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Lesson 5: Central-local communication

  • Networks for central-local communication and decision-making
  • Mechanisms and structures to safeguard local government interests and autonomy – allowing local governments to raise issues, negotiate with central government and find consensus around finance and administration.

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The 5 recommendations

  • Constitutional protection
  • Revenue raising and spending options
  • Bottom up approach (subsidiarity)
  • Territorial equalisation (systematic and guaranteed)
  • Central local communication

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Thank you

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