Traditionally, grants made up the bulk of funding for local councils in England. At least in principle, they were set each year, accounting for a council’s spending need and their council tax base. This system of equalisation offered substantial insurance to councils – if their needs increased or their tax base decreased, they would get additional grant-funding to compensate. But it also meant councils had few financial incentives to constrain spending needs or boost their local economy and tax base.

In the last few years, three major changes have occurred. First, large cuts to grants have been made as part of the Government’s fiscal consolidation efforts.