Raising money

A key focus of our Climate Action network is working with councils to adopt ambitious Climate Action Plans. We've written this guide to help you understand more about the section on raising money in the Climate Action Plan for councils.

28 Sep 2021

Background information

As campaigners, we need to understand that councils are struggling with stretched budgets due to the COVID-19 pandemic. Additional government money to help them respond to the pandemic hasn't been anywhere near enough especially as the crisis hit when councils had already suffered a decade of cuts.

According to the Local Government Association, councils face a £2.5 billion funding shortfall in 2022 just to maintain existing services. Funding that has been made available for action on climate has been too fragmented, complicated, and often in the form of competitive grants, hindering council’s ability to set out long-term plans that include building the skills and capacity needed to build back better.

While lack of money can sometimes just be an excuse for inaction, a lack of staff, expertise and finances is hindering action on climate and nature restoration, even when there's political will. In addition to lobbying government for more long-term funding and fundraising powers, councils should consider innovative ways to raise money locally now

The goal

Councils should have sufficient resource to invest in the changes needed to restore nature and meet climate goals, so that they can reap the dividends and deliver their fair share of greenhouse gas reductions.

What councils should do

Points 7 to 10 in our Climate Action Plan for councils suggest councils should:

7. Introduce a workplace car parking levy and/ or similar initiative to fund and encourage sustainable transport, particularly measures that allow people to travel safely to work, such as segregated cycleways.

Nottingham City Council has used powers to charge a levy for workplace parking. This both encourages a greater use of public transport and provides funds for the council which they ring-fence for public transport. It has generated £75 million in new revenue since the project began, which has helped to fund improvements to the tram system, redevelopment of the train station and support for the city’s bus network. Councils can also introduce a congestion charge and use the money to fund public transport.

8. Raise money using Community Municipal Investment for low-carbon infrastructure, particularly measures that speed up carbon emissions reductions and increase resilience to the pandemic, such as energy efficiency, and converting roads or car parks to public green space.

West Berkshire Council used Community Municipal Investment (CMI) to raise money for green energy projects, like putting solar panels on schools, and is convinced of its potential to "supercharge the green economy". More than 600 investors raised £1 million in funds between July and October 2020, and over 20% was invested by local people. CMI keeps locally saved money in the local area. The CMI also meant a lower interest rate for the council, reducing the overall cost of borrowing to all taxpayers across the district.

Warrington is another council using this approach, and the Place Based Climate Action Network (PCAN) has produced a report on Community Municipal Investment for community groups to learn from.

9. Use legal and planning mechanisms such as Section 106 agreements, Community Infrastructure Levy and others to fund climate actions and nature restoration projects.

Section 106 agreements are when a local authority gives the approval for a new development, such as new homes, based on the requirement that the developer also funds other related projects. Milton Keynes uses this approach to require new housing developments to fund energy efficiency and renewables if they can't fully meet the strict low carbon standard set by the council.

The Community Infrastructure Levy (CIL) is a charge which can be levied by local authorities on new development in their area. It is an important tool for local authorities to help them deliver the infrastructure needed in their area. Councils should be using CIL to fund carbon cutting projects including active travel infrastructure and new green space. South Gloucestershire council uses CIL to fund the capital elements of its Climate Emergency action plan.

10. Implement licensing of the private rented sector to cover the enforcement costs of ensuring compliance with minimum energy efficiency standards. (Applicable in England only).

Newham Council requires every home that is privately rented to pay for a licence. It achieved this power “after a consultation with Newham residents, and a lengthy struggle with central government”. Such as scheme can fund energy efficiency checks. Oxford City Council also has a self-financing scheme to police minimum energy efficiency standards.

The Centre for Cities, together with the Joseph Rowntree Foundation, has identified additional ways in which councils can raise money.

Government action

Councils can’t raise all the money they need for action on climate change locally, particularly those in poorer parts of the country. There will always be an important role for national government to provide funds. Councils have been warning for some time that they won’t be able to deliver action at the scale and pace commensurate to the climate and ecological emergencies without additional powers and resources. Friends of the Earth has joined local government organisations, academics and other NGOs in setting out a blueprint of what’s needed from national government to support councils including ensuring they have the capacity and funding to deliver on their climate ambitions.

In addition to the much-diminished block grant the government pays to local authorities, sources of funding for climate action include EU funds, the ‘Shared Prosperity Fund’(which replaces certain EU funding), and Industrial Strategy funds and the Levelling Up Fund as well as specific grants for actions such as tree planting and retrofitting buildings. The new National Infrastructure Bank is an opportunity for local authorities to borrow money for zero carbon actions, but some local authorities are hesitant to borrow money due to concerns about paying it back

Government funding for climate action is split between many different funding streams and can be complex to navigate and not very joined up. Funding is often too competitive, for example a bid to the Levelling Up Fund can cost a local authority between £35,000 and £100,000. Short term grants make it hard for councils to invest in the long term skills and training that are needed locally so they may bring in contractors rather than skill up the local workforce.

The National Audit Office (NAO) recently concluded that the fragmented and competitive nature of the funds available for local authorities to tackle climate change “brings the risk that money does not go to where the need or opportunity is greatest, and it can make it difficult for local authorities to plan for the long term”. The NAO and the Climate Change Committee (CCC) have both called for a clearer role to be set out for councils and for councils to be properly resourced. As with national policy making, it's essential that the government aligns all funding aimed at economic recovery with its legally binding climate targets.

The government also needs to empower councils to raise much more money locally for climate change action and nature restoration. Research by transport experts at the consultancy Transport for Quality of Life has identified that there are at least 16 different ways councils on the continent raise money for public transport, including payroll taxes, local sales taxes, property taxes, visitor taxes and others. It makes sense to enable councils to raise money themselves because they are best placed to understand local opportunities and because locally raised money will reduce the need to increase central government funding.

Further reading

Funding and financing inclusive growth in cities. https://www.centreforcities.org/publication/funding-and-financing-inclusive-growth-in-cities

Transport for Quality of Life. http://www.transportforqualityoflife.com/policyresearch/publictransport

National Audit Office report on what local government needs to play its part in meeting net zero. https://www.nao.org.uk/report/local-government-and-net-zero-in-england/

Resources