Revenue support grant

Local Government Finance Revenue Expenditure - Revenue Support Grant

The overwhelming majority (74% as of 2008 – 2009) of local authority revenue finance derives from government grants.

Until recently the bulk came in the form of the Revenue Support Grant (RSG), also known as the General Block Grant, which local authorities were left to spend at their discretion, focusing on particular local funding needs.

However, the importance of the RSG has hugely diminished and it now represents only 3% of local authorities' annual revenue budget, as 'passporting' process initiated by the central government has 'ring-fenced' and directed the grants to specified areas of spending, notably schools.

Since the 2006 - 2007 tax year, the central government has worked out the RSG on the basis of a two new calculations: the relative needs formula (RNF) and the relative resource amount (RRA).

The RNF is a kind of formula based on detailed information about the population size, social structure, and other characteristics of a local authority area, such as the number of pensioners and school-aged children and its relative economic prosperity.

Within the RNF, separate formulae are used to decide how much should be allocated to individual local authorities to cover the likely expenses, associated with each of the 'major service areas' such as education, social services, police and fire.

The RRA, in contrast to the RNF, is a negative figure. It is based on the logical assumption that an area with a large number of Council Tax-paying households needs less financial help from central government than one in a poorer area.

Then the resulting figure from the formula: RRA – RNF will reflects what an individual area should be allocated in government formula grants, and it will be shared according to its levels of responsibility between local authorities.