William Eichler 04 July 2018

Whitehall accused of ‘complacency’ over financial future of local government

MPs have blasted the Government for being ‘complacent’ about the financial future of local authorities.

A new report has criticised the Ministry of Housing, Communities and Local Government for being ‘overly reliant’ on a favourable outcome from the 2019 Spending Review to address the local government sector’s financial problems.

Published by the Public Accounts Committee (PAC), the report accuses the department of not developing a plan to secure the ‘long-term financial future’ of councils, despite the fact they are facing a funding gap of over £5bn by the end of the decade.

The report comes after communities secretary James Brokenshire failed to make a firm commitment to fighting for more funding for councils at the Local Government Association's (LGA) annual conference.

The PAC report also criticised the department for a lack of transparency.

‘It is not transparent enough about its understanding of the pressures faced by local authorities, meaning Parliament and the taxpayer cannot be sure that it genuinely understands or is addressing the issue,’ the report states.

‘It is no secret that councils are under the cosh. The mystery is how central Government expects their finances to improve when it has such an apparently shaky grasp of the issues,’ commented committee chair, Meg Hillier MP.

‘It beggars belief that the department responsible for the local government financial framework, and which takes the lead in assessing councils’ funding requirements, has neither an agreed measure of sustainability nor a clear definition of “unsustainable”.

‘These are fundamental weaknesses in its approach to assessing the financial risks facing councils and the sector as a whole – risks that, as the evidence bears out, are clear and pressing.’ 

‘Many councils have been forced to plunder their reserves to keep essential services going, and made deep cuts to spending in other important areas. The council funding gap is likely to top £5bn by the end of the decade,’ Ms Hillier continued.

‘Clearly, this is not sustainable. There is only so far the elastic can be stretched before it snaps. Yet, as our report makes clear, central government’s response to this looming crisis smacks of complacency.’

Responding to the report, an MHCLG spokesperson said: 'Local authorities are responsible for their own funding decisions, but over the next two years, we are providing councils with £90.7bn to help them meet the needs of their residents, including social care.

'We recognise the pressures councils are facing, so we are working with local government to develop a funding system for the future.

'On top of this, we are giving them the power to retain more of the income they get from business rates so they can use it to drive further growth in their area.'

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