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Central Grants and Local Spending in Britain: A Reappraisal of the Post-Layfield Period

Central grants are the key financial instruments through which British governments seek to influence and support the financing of local authorities. In essence, there are two key forms of grant – specific grants, which aim to promote expenditure on particular services and objectives, and general grants, which are unhypothecated and provide financial support in a form which local authorities are free to spend on their own priorities. One major review of the objectives of central grants included the need to ensure a similar pattern of services to each authority and the facilitation of a degree of local discretion in taxation and service provision (Barnett, 1982). In this article we examine the changing roles of central grants in central–local financial relations. Central grants have also been seen as a means of influencing and directing the level of local expenditure. Over the twentieth century, central government had been concerned both to promote local expenditure and protect ratepayers from the costs of growth (Foster et al., 1980). A second trend was the consolidation of grant aid into general rather than specific grants (Loughlin, 1996). In 1974 local authority reorganisation was introduced in a context of high inflation, rating revaluation and economic crisis as the oil price increases induced a recession. The British government, in response to ratepayer protest, established a Committee of Inquiry to examine the problems of local government finance. Layfield was the second major local finance inquiry in five years, following the Green Paper of 1971 (HMG, 1971). It argued that there was a growing political concern over local taxation and a desire to protect ratepayers, and that the scale of grant reinforced pressures for central government intervention, which weakened local accountability.