Councils raise £10bn+ through charging but amount falls in real terms

English councils raised £10.2bn through charging for services in 2011/12 – covering about 10% of their expenditure, the Audit Commission has revealed in a briefing.

However, the Commission also said that from 2004/05 to 2011/12 councils’ total income from charging had reduced by 2% in real terms (when adjusted for inflation), and by 11% in real terms since 2009/10.

Other key findings from the briefing – drawn from the Commission’s Value for Money profiles – were:

• Charging in 2011/12 funded 9% of single-tier and county councils’ overall service expenditure, and 20% of district councils'.
• Despite the reductions, for councils as a whole the contribution of charging income to service spending had remained relatively stable – at about 10%.
• Although nationally the total income from charging was less than half the amount raised through council tax in 2011/12, at the local level it exceeded council tax in one in three (32%) district councils and one in five (21%) London boroughs.
• There was great variation between councils in terms of the amount of income they generated from charges, the ratio of charging income to service spending, and the changes to these over recent years. The contribution of charging to spending in 2011/12 varied most for district councils, with 2 to 87% being generated through charges. Half of district councils had between 14 and 25% of their service spending funded through charging for services.

Jeremy Newman, Audit Commission chairman, said: “There is no ‘one-size-fits-all’ formula for how councils set their local charging policies. We are providing information and tools for councils, and those who hold them to account, to help understand the important role that charging plays in councils’ strategic financial management.

“The fact that some bodies derive more income from charging than council tax is neither good nor bad, but highlights the significant role charging plays in funding public services, and reminds councillors and electors to carefully scrutinise the approaches councils are taking.”

Newman added: “Within the limitations set by Government, councils can charge for a wide range of the services they provide to recover the cost of providing those services. A multitude of factors, from a council’s location to its population’s needs or demographics, will influence councils’ opportunities and decisions about charging for services.

“With reductions in their funding and rising demand for many services, councils are facing difficult choices about which services they can afford to provide. The use of charging to support a service, or influence demand merits closer examination. At the same time, councils need to ensure that their approaches to charging are delivering the benefits expected and remain lawful.”

Responding to the Audit Commission briefing, Sir Merrick Cockell, Chairman of the Local Government Association, said: "Despite facing escalating overheads and the deepest cuts in the public sector councils are working successfully to keep fees and charges low for hard-pressed residents. The real terms reduction in income from fees and charges represents an outstanding effort under extremely difficult circumstances.

"The bigger picture is that the funding system for local government is bust. Rigid central control of councils' main funding streams has left many areas in a precarious financial position and some councils are in danger of being unable to fund their statutory responsibilities. Unless there is a complete overhaul of the way local services are funded we face the very real possibility of local authorities starting to fail their communities."