In Law, the finder must return the dog to the owner or inform the LA that he has found the dog immediately as it's illegal to hold a dog which is unreported. The local authority has a legal obligation to record data of all dogs handed in to them (k/a 'seized' by them) but no obligation to record details of lost dogs, though of course it's common sense and good practice to do so. Police no longer have any direct powers over strays and no longer take them in unless they fall under the Dangerous Dogs Act. The Police could use discretionary powers under the Control of Dogs Act but in practice it doesn't really happen.
The finder may keep the dog rather than take/send it to the LA's pound. He does not need permission for this per se but the Law says that he must be capable of caring for the dog adequately. Effectively the onus is on the LA to demonstrate that the finder isn't capable. Many local councils are unaware of this and will tell you that you must hand the dog over to them. This is bullshit. Councils are good at spreading it.
Shiney is mistaken on what she says must happen if the finder wishes to retain the dog (sorry Shiney!).
The finder must agree to keep the dog for at least 28 days. Thereafter the dog cannot be sold or given to any other party as he is never really the finder's and must be relinquished to the owner should he come forward.
If the finder opts to keep the dog he should ensure that a vet/dog warden/rescue scans the dog for a microchip so that he might reunite dog and owner.
Given that the LA should record lost dog reports even though the stupid law says they don't have to, you'd be wise to call the dog warden for a chat on Monday morning Kid. Also, although the Police don't have to record the loss of a dog, if the owner has any sense he'll have got on to them and bugged them enough until they agreed to do so, so a word to them wouldn't go amiss.
Otherwise... visit the prat who was shouting at the SBT, with a couple of big guys and big sticks!
A timely reminder too that a dog tag with up-to-date contact details on it is a legal requirement in the UK and something which, had this SBT had one, would have ensured that he was on his owner's lap this evening.