Optimal Control Theory and Grants in Aid

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Abstract
The methodology of optimal control theory is used to highlight some of the current policy issues raised in the United Kingdom by the central government's allocation of grants to local authorities. It is shown that there is a link between the number of policy variables and targets and the freedom of action of individual local authorities. One consequence of current policy is shown to be that it makes optimal control theory an even more relevant tool for the analysis of the rate support grant system. Another is that the demise of local control appears to be the logical outcome in the long run.