The Treasury manages public spending within two ‘control totals’ of about equal size:
- departmental expenditure limits (DELs) – mostly covering spending on public services, grants and administration (collectively termed ‘resource’ spending) and investment (‘capital’ spending). These are items that can be planned over extended periods.
- annually managed expenditure (AME) – categories of spending less amenable to multi-year planning, such as social security spending and debt interest.
Within resource DELs (RDEL) are grants that finance local authority spending, in particular the Revenue Support Grant from the Department for Communities and Local Government and the Dedicated Schools Grant from the Department for Education. This spending is factored into our DELs forecasts. Local authorities are also able to finance spending through local sources – notably council tax and business rates. This spending needs to be accounted for in our AME forecast. We call it ‘local authority self-financed expenditure’ or ‘LASFE’. As with other spending, it is split into current and capital components.
In our latest forecast, we expect LASFE in 2017-18 to total £58.9 billion (with £47.8 billion of current LASFE and £11.1 billion of capital LASFE). That would represent around a third of total local authority spending (i.e. including that financed by central government grants) and around 7.4 per cent of total public spending. It is equivalent to £2,100 per household and 2.9 per cent of national income.