As discussed in Chapter One, local authorities in the UK and internationally have been faced with budget reductions and austerity. While there have been similar periods of public sector budget cuts in the UK that accompanied the financial downturns in the late 1970s and early 1990s (John, 2014), the application of austerity since 2010 has been a political act designed to transform the way in which local authorities operate and are funded (Borges et al, 2013; Gamble, 2015). As the UK is one of the most centralised states in the Organisation for Economic Co- operation and Development (OECD) (OECD, 2017), local authorities have increasingly been dependent on government funding. This has been directly through the Revenue Support Grant (RSG) paid annually by the government to local authorities and indirectly through grants and specific ‘deal’ initiatives for housing, transport and other investment, including city deals (Waite et al, 2013; O’Brien and Pike, 2015) and growth deals (Ward, 2019). The approach from 2010 onwards, taken by the coalition and then Conservative governments, has been more fundamental and revolutionary (Taylor- Gooby, 2012). In 2010, the government decided that the RSG funding paid to councils would be removed and this was implemented through annual tapering to zero by 2020 (Lowndes and Gardner, 2016; LGA, 2018).
It was intended that the RSG would be replaced by each council's retention of 75% of the local business rates. However, this is essentially an inequitable system, as land values vary between different local authorities. Those areas with the greatest need frequently have the lowest land values. It also means that, in practice, councils have to return to a system where they raise revenue for local services through property taxes. This is similar to the system of local government funding that operated until local government reorganisation in 1974, although up to that point, local authorities were provided with funding to build and manage social housing (HMSO, 1981; Chandler, 2013). Some councils also received specific funding for education and social care but as the local authority roles have been reduced, particularly through the introduction of academies into education provision, this has meant that some of the base costs of running a local authority, which were shared between services, now have a much smaller service base to draw on.