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Finance and funding

The Welsh Government provides most of the funding for local authorities in Wales, including:

  • unitary authorities (the county and county borough councils)
  • police authorities 
  • national park authorities 
  • fire and rescue authorities.

The funding for local authorities comes from a number of sources.  The largest component of funding comes from the Welsh Government through grants that can be used by the authorities for any purpose they choose in delivering the services for which they are responsible. These grants are known as non-hypothecated grants and include the largest single grant they receive, the Revenue Support Grant.

The Welsh Government also provides funding to local government in the form of hypothecated grants. These grants can only be used for the specific purposes for which they are provided.

In addition to the funding authorities receive from the Welsh Government, they receive some hypothecated grants from other government bodies. They also receive income from nationally set non-domestic (business) rates and from locally set council tax.

Local authorities also receive grants from the Welsh Government for capital spending. In addition, they can determine how much they can afford to borrow based on a prudent assessment of their finances using professional codes of practice. The primary and secondary legislation (made by the National Assembly for Wales) provides the broad framework for the ‘prudential system’ but the system places the emphasis on local authorities planning their needs for capital expenditure in a sensible and long term way based upon sound management of assets and finances.