This is a common misconception but Eric Pickles, Secretary of State for Local Government and Communities, demonstrates that it is simply not the case, with his announcement of an extra £250 million from central government to fund the most important of local services (in his opinion), weekly rubbish collections. Looking at the numbers from my local council, Oxford, you can see the breakdown of where funding for the council's expenditure comes from.
Council tax accounts for only 43% of council spending. The bulk of the council's income comes via central government through a redistribution of business rates (levied locally but pooled nationally) and a straight grant. It should be noted however that the government is mandating that business rates, via the localism bill, should in future stay in the locality in which they were collected. This could act as an incentive for local communities to accept new business development in their area.
Additionally it is important to define what 'local services' actually include. Rubbish collection and street lights are obviously local. However, despite the fact that they are funded nationally, I think that many people would regard their local schools and hospitals as 'local services' since they typically expect to find education and medical services within their community and they are not prepared to travel across the country for alternatives. In this respect the amount of money raised by council tax pales into insignificance when you compare it to spending on other 'local services'.
Oxford council tax revenues are £12.5 million (2011), Oxford hospitals expenditure (2011) is £625 million and the plot above displays these numbers as areas. Obviously including spending on local schools would make the council tax receipt look even smaller. So, given that there are: excellent public transport options, two highly regarded primary schools, two world-class hospitals, all within walking distance from my home. I would say the 'local' taxes I pay, with respect to the public services on my doorstep, look pretty good value. For other people this may not be the case(!) and I will return to elaborate this point in later posts.
Data from www.oxford.gov.uk and www.oxfordradcliffe.nhs.uk