Optimizing the level of grant support for local government: An application of a behavioral model

The United Kingdom government has over the last decade undertaken an unprecedented campaign design to reduce the level of current expenditure in local authorities. The campaign has patently failed, not least because of a failure adequately to research many of the measures introduced during the 1980s. A major return of local government finance has now been implemented, which includes the replacement of the local domestic property tax by a community charge, or poll tax. This paper shows how, using behavioural models of local authority budgeting developed under the old system of local government finance, it might be possible for the government to approach an optimal policy in the implementation of the reforms.