Banking on Growth: Trends in local government funding and finance

This report sets out key trends in local government funding and finance

Report published on 25 July 2012 by Zach Wilcox, Joe Sarling and Ewan Wright

Much of the current debate around infrastructure investment has focused on how central government can stimulate growth, but this ignores the key role that local government can and does play in funding infrastructure at the local level. Studies have shown that there is room for local government to have greater scope and control over local projects that could unlock growth.  However, central government still controls much of the purse strings.  In the current context of deficit reduction, if local government is to support growth, it must find new ways to finance the infrastructure the UK needs to restart growth

Banking on Growth finds that a lack of financial freedom over local revenues restricts local government’s ability to finance capital projects.  Policies such as localised business rates retention is a small first step towards giving local government more power over their revenues.  Additionally, new funding and finance propositions are maturing in local government — from pension funds to bonds and City Deals.  At a time of economic downturn, local government and central government must work together to make the most of the changes that lie ahead.

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Senior Consultant, City Economics at Arup