Central government ‘must do more’ to understand local authority finances and their impact on taxpayers, Parliament’s Public Accounts Committee has claimed.

The committee warned the Department for Communities and Local Government (DCLG) was complacent in the risks associated with the scale of commercial activities that local authorities were undertaking.

It follows plans by councils to raise revenue from capital investment in property and other business ventures such as commercial rental units and sales.

PAC claimed that councils may lack the skills and experience of members and officers to undertake such opportunities, and if they go wrong, taxpayers will ‘end up footing the bill’ – as well as putting other services under threat.

It called for the DCLG to review the level of skills at councils for such tasks.

The report also identified the uncertainty of Brexit on councils and how devolution could deliver new issues around transparency and accountability.

Meg Hillier MP, chair of the PAC, said: 'It is alarming that DCLG does not have a firm grasp of the changes happening locally and their implications for taxpayers.

'Poor investment decisions cost money—money that might otherwise be spent on public services.

'Local authorities need the skill-set to invest wisely and the Department must bear its share of responsibility for ensuring these skills are in place.'

Cllr Claire Kober, chair of the Local Government Association’s Resources Board, said: 'Against this continued backdrop of financial austerity, councils are having to continuously look for new ways to generate revenue. Across the country, council officers and members are developing the skills and expertise to take a more commercial approach to investment decisions.

'All commercial activity involves risk and potential losses as well as the potential to make profits. Local authorities have to adhere to strict rules and assessments before making a decision to ensure it is affordable and provides value for money.

'More self-sufficiency for local government cannot be accompanied by central government reviews and monitoring. Councils are open, transparent and democratically accountable and their spending is already subject to public scrutiny.'