Vibrant places

Income generation – councils’ business case for change

Amidst financial pressures, councils must generate income to keep delivering the best services for their area.  

Local leaders are becoming more commercial, with all but two regions achieving an increase in income generation during 2013-2016 (Figure 3). Local authorities are seeking to generate income in many ways, from fees and charges, such as car parking, through to treasury investment, such as real estate development.

Figure 3 Country/regional variance in income

Region % variance in income 2013/14-2014/15 % variance in income 2014/15- 2015/16 % variance in income 2013/14-2015/16
East Midlands 6.12 5.05 11.47
East of England -1.29 -0.13 -1.42
London 7.51 -6.54 0.48
North East -2.67 6.20 3.37
North West 1.10 -0.41 0.69
South East -1.98 6.76 4.65
South West 3.33 4.88 8.38
West Midlands -0.10 8.84 8.73
Yorkshire and The Humber 3.54 4.57 8.27
Wales -2.23 -3.75 -5.89
Scotland 0.43    

Last year was a landmark year for local government in a number of ways. In addition to the increase in income generation, the level of treasury capital kept in banks saw a significant drop and levels of investment – which have seen a year on year increase over the past five years – hit a high of £36 billion in 2016/2017 (Figure 6). Councils' ability to trade has enabled this rise in income as well as multiple market reforms.

Figure 6 – English local government investments (£m)

Figure 6 – English local government investments (£m)

Source: DCLG Financial Statistics 2012-2016

Market reforms and the ability to trade has presented councils with new opportunities to commercialise. A council’s investment ability will vary across tiers and regions of government due to external and internal factors such as powers and delegated authorities, political willingness to accept risk, organisational culture and capacity to implement change.

The ideal scenario for councils is investing to earn with a financial and social return. Councils are now striving to generate income and achieving multiple strategic outcomes for the same spend.

Some councils may accept a lower financial return to accommodate additional social outcomes, especially if these benefits are felt locally. Equally, social returns may also be realised indirectly from financial gain when the money is invested in local public services.

To find out more such as analysis of local government spend by region and authority type, as well as case study examples of the different ways authorities are generating income and the opportunities it provided, download our income generation report here.

Commercial healthcheck in local authorities

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Income generation report: