Local Government Finance
The question
To ask the Secretary of State for Housing, Communities and Local Government, whether her Department has made an assessment of the potential impact of reforms to the taxation of (a) rental income, (b) shareholder dividends and (c) other passive income on the levels of funding for local authorities.
Answered by Jim McMahon
Income tax is the largest source of Government revenue and helps to fund the UK’s schools, hospitals, and other essential services that we all rely on. In 2024-25, the Office for Budget Responsibility expect income tax to raise around £302.7 billion. Taxes can be raised to support the Government’s priorities, but income tax is not formally hypothecated for specific uses, such as for local authorities.
The additional funding announced by the Chancellor at the Autumn Budget and through the 2025-26 Local Government Finance Settlement will provide over £5 billion of new funding for local services over and above local council tax. We are delivering a Settlement that begins to fix the foundations of local government by providing significant investment redirecting funding towards the services and places that need it most. The Settlement for 2025-26 makes available over £69 billion for local government, which is a 6.8% cash terms increase in councils’ Core Spending Power on 2024-25.
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