LOCAL TAXATION IN ENGLAND AND WALES The principal function of the local authorities of England and Wales—these authorities comprise county councils, town councils, urban district councils, rural district councils, parish councils, and other bodies—is to provide and maintain the services which the State (i.e., the Central Government), without whose consent they cannot undertake any function, has either directed or authorized them to provide and maintain. The collection of money to pay for those services is ancillary to this principal function. The money so collected is, so far as it is collected by the State and contributed by it to local authorities, sometimes de scribed as "national taxation applied to local purposes" or (less contentiously) as "national taxation applied in meeting part of the cost of services administered by local authorities." The whole of the money collected by local authorities themselves to pay for these services is sometimes described as being (or being obtained from) "local taxation"; more frequently the expression "local taxation" is applied only to that part of the money which is collected by local authorities, for public local purposes, by means of local rates; and it has been contended that whenever a local rate is described as "taxation" there should be some caution ary note to the effect that a local rate combines in varying degrees the elements of (i.) a compulsory payment for a service or serv ices indispensable to the individual ratepayer and unobtainable by him, by his own effort, at a smaller price than is paid by him in the local rate, and (ii.) a compulsory payment for a service or services not indispensable to the individual ratepayer or obtainable by him, by his own effort, at a smaller price.
The number of local authorities in England and Wales having financial transactions is about I L000. A list of the principal services maintained by them is given in column i of the following table (Table A). Column 2 shows (in thousands of £s), as illus trating the relative importance of the several services from the point of view of local finance, the amount spent out of current revenue by the local authorities on each of those services in a recent year (1925-6). Columns 3, 4 and 5 indicate how large a proportion of that expenditure was met from sources not being State contributions or local rates, from State contributions, and from local rates.
The table shows inter alia that, contrary to a widely-held popular belief, the current income of local authorities from local rates is much smaller than their current income from other sources.
Current Income Other Than from Rates and Govern ment Grants.—There is (as already indicated) some difference of opinion as to whether the receipts—or some of the receipts— of local authorities from fees, tolls, dues, rents and other sources not being either rates for public local purposes or contributions from the State, should or should not be deemed to be derived from "taxation." Broadly stated, public opinion seems at the
present time to regard them as being essentially of the nature of receipts for services rendered or commodities sold to individu als qua individuals and not as essentially of the nature of taxa tion. Support for this opinion may be found in the fact that analogous receipts by the Post Office and by public utility companies from individuals for services rendered to them are not generally regarded as in the nature of "taxation." Government Grants to Local Authorities.—The system of giving Government grants to local authorities originated in the years 1833-35. In the form in which it developed during the period up to 1888, it was a system of grants attached to specified items of expenditure, and the grants, while in terms described as in relief of local rates, in fact so operated as to stimulate expenditure on those items and to involve Parliament and the Government departments in the supervision in detail of some parts of the work of local authorities. This system, except so far as it related to elementary and industrial schools (most of which were at that time in the hands of voluntary bodies), was swept away by the reforms embodied in the Local Government Act of 1888, and, in lieu of it, there was set up a system whereby Parliament "as signed" to the county and county borough councils established by that act the revenues arising from certain national taxes and, at the same time, required those councils (in effect) to make pay ments to themselves and other local authorities in substitution for the discontinued grants. The assigned revenues were made distributable to the councils through a special account, called "the local taxation account," on bases which were so designed as not to stimulate local expenditure. The yield of the assigned revenues was at the outset greater than the amount of the discontinued grants and there was an expectation that it would so develop as to keep pace with the normal growth in local expenditure. In fact, the exigencies of national finance soon arrested the development of the assigned revenues system ; annuities of fixed amount were substituted for most of the assigned revenues; periodical revi sions which had been contemplated by the authors of the system did not take place; and the system, although still (1928) main tained in form, is regarded as having become obsolescent. It now exists side by side with a great variety of ad hoe Government grants which reproduce many of the features of the pre-1888 system. Indeed, the number of these grants is so great and the conditions subject to which they are given are so various that it is impracticable to do more than briefly indicate the main facts.