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Unacceptable lack of ambition … no aspiration

Published: Thursday, 21st February 2019

Select Committee’s verdict on the Ministry of Housing, Communities and Local Government’s approach to council finances.

A recent report by the House of Commons Public Accounts Committee (PAC) has said it is “dismayed” by the Government’s view of what constitutes local government sustainability. Indeed, its chair, Meg Hillier, said that the Government was in denial about the state of council finances. With such strong views being expressed, WMiC sets out the main points of their report.

In launching their report on Local Government spending, the PAC noted that some councils were in “an extremely worrying position: overspending their budgets for social care, reducing key services, falling back on financial reserves and increasingly relying on generating other sources of income, which come with greater risks”. However, despite the long-term nature of these problems, overall real terms spending by councils falling by over 19% between 2010-11 and 2016-17, the Committee found that the Department was relying on short-term approaches.

In a strongly worded report, the Committee commented that there is “no sign that the Department (Ministry of Housing Communities and Local Government) has a clear plan to secure the financial sustainability of local authorities in the long-term”. As such it is worth noting the Committee’s headline conclusions in full:

  • “Central government financial support for local government continues to be characterised by one-off, short-term initiatives, which do not provide value for money, rather than a meaningful long-term financial plan for the sector”.
  • “The Department has an unacceptable lack of ambition for the sector, with no aspiration for improving local finances beyond merely ‘coping’”.
  • “It is worrying that the Department does not know what its minimum expectations are of the full range of services that local authorities are expected to provide”.
  • “We are deeply dismayed that the Department views the financial sustainability of local authorities solely in terms of a small set of statutory services rather than the full range of services local people need”.
  • “It is not acceptable that the Department repeatedly states that the local authority sector as a whole is sustainable but refuses to provide evidence about how it has reached these conclusions”, and
  • “We are concerned that the Department uses similar data and methods to other stakeholders to assess the financial sustainability of the local authority sector yet reaches different conclusions”.

Recommendations

Indeed, the difference in the assessments of financial sustainability referred to in this last conclusion is significant. As such, the Committee has called for the Department to compare their figures to the Local Government Association’s analysis which estimates a £3.2 billion shortfall in 2019-20, and in doing so to explain the differences.

Elsewhere, the Committee has recommended that the Department set out what it will do in the medium-term to improve financial sustainability, considering a “full range of options” and not just relying on the forthcoming Spending Review and greater local business rate retention. It has also asked for the Department to publish the minimum service levels it uses to model the costs of statutory services and to set out how it takes account of other locally determined services and how they should be funded. Mindful of the longer-term knock-on effects cuts in such services can have statutory ones, they have also asked the Department to say how it takes account of the cost implications for statutory services, should locally determined services be lost.

Local area visualisation

For those interested to see how particular local areas have faired in terms of funding over recent years, the National Audit Office produced an interactive “visualisation” on the back of their Financial sustainability of local authorities 2018, report. Among the information presented, are changes in council’s income and spending and other factors such as budget overspends and the use of reserves.

Further Reading

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