Local Government Finance Act 1988

The Local Government Finance Act 1988 introduced significant reforms to local taxation in the United Kingdom (except Northern Ireland). The old systems of rates were replaced by the Community Charge (for individuals) and business rates (for businesses). The Community Charge was extremely unpopular, leading to the poll tax riots of 1990,[1] and contributing to the resignation of Margaret Thatcher as Prime Minister later that year.[2]

Local Government Finance Act 1988
Act of Parliament
Parliament of the United Kingdom
Long titleAn Act to create community charges in favour of certain authorities, to create new rating systems, to provide for precepting by certain authorities and levying by certain bodies, to make provision about the payment of grants to certain authorities, to require certain authorities to maintain certain funds, to make provision about the capital expenditure and the administration of the financial affairs of certain authorities, to abolish existing rates, precepts and similar rights, to abolish rate support grants and supplementary grants for transport purposes, to make amendments as to rates and certain grants, to make certain amendments to the law of Scotland as regards community charges, rating and valuation, to provide for the establishment of valuation and community charge tribunals, and for connected purposes.
Citation1988 c. 41
Territorial extent Great Britain
Dates
Royal assent29 July 1988
Commencement1 April 1989
Status: Amended
Text of statute as originally enacted
Revised text of statute as amended

The sections of the Act pertaining to the Community Charge were repealed by the Local Government Finance Act 1992, which introduced the new Council Tax as a replacement from 1993.

Section 114
This section is an excerpt from Section 114 notice.[edit]

Section 114 notices are reports issued by the chief financial officer (or Section 151 officer) of a British public body to prevent certain types of expenditure. The notices take their name from Section 114 of the Local Government Finance Act 1988.[3][4]

The most common type of notice is made under Section 114(3) which restricts all spending except for that which funds statutory services.[5][6] Despite the fact that local authorities in the United Kingdom cannot go bankrupt,[7] issuing a Section 114 notice is often described in the media as a council effectively declaring bankruptcy. Most councils under a Section 114 notice will then pass a new budget to introduce cuts and reduce spending.[7]

Section 114 notices have been issued by Hackney Council in 2000, Northamptonshire Council twice in 2018,[8] Croydon Council in 2020 and 2022,[9] Slough Council in 2021,[10] Thurrock Council in 2022,[11] and Woking Borough Council and Birmingham City Council in 2023.[12][13]

References
  1. "1990: Violence flares in poll tax demonstration". On This Day. BBC News. Retrieved 13 December 2020.
  2. "1991: Heseltine unveils new property tax". On This Day. BBC News. 21 March 1991. Retrieved 13 December 2020.
  3. "Local Government Finance Act 1988: Section 114", legislation.gov.uk, The National Archives, 1988 c. 41 (s. 114), retrieved 27 November 2021
  4. Statement of the Chief Financial Officer on Reserves, Robustness of Estimates and Affordability and Prudence of Capital Investments (PDF) (Report). Oldham Council. 26 February 2020. p. 28. Retrieved 27 November 2021.
  5. Paul Turner (16 June 2023). "No such thing as a s114 notice". Local Government Lawyer. Retrieved 19 September 2023.
  6. "Appendix 1 - Definition of a Section 114 Notice" (PDF). Oldham Council. Retrieved 6 September 2023.
  7. Mark Sandford (21 November 2022). "What happens if a council goes bankrupt?". House of Commons Library. Retrieved 5 August 2023.
  8. Brady, Dominic (24 July 2018). "Northamptonshire issues second section 114 notice". Public Finance. Retrieved 13 April 2022.
  9. "Croydon Council bans new spending under Section 114 notice". BBC News. 11 November 2020. Retrieved 27 November 2021.
  10. Local authority financial sustainability and the section 114 regime (pdf) (Report). Vol. 2. Housing, Communities and Local Government Committee. 14 July 2021. p. 31.
  11. "Thurrock Council issues S114 notice of financial distress". BBC News. 19 December 2022. Retrieved 20 December 2022.
  12. Richard Partington (7 June 2023). "Woking council declares bankruptcy with £1.2bn deficit". The Guardian. Retrieved 7 June 2023.
  13. Jessica Murray (5 September 2023). "Birmingham city council declares itself in financial distress". The Guardian. Retrieved 5 September 2023.
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