Recommendations & Conclusions
28 items
1
Conclusion
Third Report - Financial distress in lo…
Accepted in Part
Local authorities have seen significant reductions in their spending power coincide with increasing demand for their services and inflationary pressures exceeding those in the wider economy. Recent funding settlements, while increasing in cash terms, have not kept pace with these pressures leading to a downward spiral. The prospect of further …
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Local authorities have seen significant reductions in their spending power coincide with increasing demand for their services and inflationary pressures exceeding those in the wider economy. Recent funding settlements, while increasing in cash terms, have not kept pace with these pressures leading to a downward spiral. The prospect of further real terms funding cuts is likely to exacerbate existing concerns about systemic underfunding, with the current funding gap already estimated at £4 billion.
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Government response AI summary
The government acknowledges significant funding pressures and details recent additional measures for local authorities, including £600 million extra funding, increased rural grants, and a 4% Core Spending Power increase for all councils for 2024-25, while committing to return to multi-year settlements in the next Parliament.
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Ministry of Housing, Communities and Local Government
2
Recommendation
Third Report - Financial distress in lo…
Accepted in Part
The Government must include additional funding in the local government finance settlement for 2024–25 to ensure local authorities bridge their estimated £4 billion funding gap. The Government must set out which local authorities are being prioritised and why for this financial settlement. The Government must also set out what longer- …
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The Government must include additional funding in the local government finance settlement for 2024–25 to ensure local authorities bridge their estimated £4 billion funding gap. The Government must set out which local authorities are being prioritised and why for this financial settlement. The Government must also set out what longer- term support will be provided to local authorities if the £4 billion funding gap is not fully met in the forthcoming financial settlement.
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Government response AI summary
The government committed an additional £600 million for local authorities in 2024-25, prioritising social care councils and rural populations. It noted an overall increase in Core Spending Power of up to £4.5 billion, but stated longer-term support and multi-year settlements are matters for the next …
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Ministry of Housing, Communities and Local Government
3
Conclusion
Third Report - Financial distress in lo…
Rejected
There is widespread agreement that Council tax is outdated, regressive, and long overdue for reform. The Government’s increasing reliance on council tax to fund local authorities is causing a disproportionately negative impact on funding levels for authorities in the most deprived areas of England. The Government’s imposition of referendum thresholds …
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There is widespread agreement that Council tax is outdated, regressive, and long overdue for reform. The Government’s increasing reliance on council tax to fund local authorities is causing a disproportionately negative impact on funding levels for authorities in the most deprived areas of England. The Government’s imposition of referendum thresholds for increasing council tax is restricting local authorities’ abilities to raise sufficient funding to fulfil their statutory responsibilities, in response to reductions in central Government grants, increased demand for services, and inflationary pressures.
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Government response AI summary
The government acknowledges the need to improve the local government finance landscape in the next Parliament but states it has no plans to revalue council tax bands and defends its existing referendum principles for council tax increases.
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Ministry of Housing, Communities and Local Government
4
Recommendation
Third Report - Financial distress in lo…
Rejected
We repeat the recommendation made in our July 2021 report, Local Authority Financial Sustainability and the Section 114 Regime, and our November 2023 report, Council Tax Collection: namely, that: the Government must urgently reform council tax by undertaking a revaluation of properties and introducing additional council tax bands, and should …
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We repeat the recommendation made in our July 2021 report, Local Authority Financial Sustainability and the Section 114 Regime, and our November 2023 report, Council Tax Collection: namely, that: the Government must urgently reform council tax by undertaking a revaluation of properties and introducing additional council tax bands, and should consider options for wider reform of council tax.
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Government response AI summary
The government rejects the recommendation for urgent council tax reform, specifically revaluation and additional bands, citing cost and potential impact on low-income households, deferring wider reform discussions to the next Parliament.
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Ministry of Housing, Communities and Local Government
5
Recommendation
Third Report - Financial distress in lo…
Rejected
Furthermore, in the short-term, the Government must raise the referendum threshold for council tax at least in line with a relevant measure of inflation. In the longer- term we recommend that the Government considers removing the threshold entirely.
Government response AI summary
The government rejects the recommendation, stating its manifesto commitment is to protect local taxpayers from excessive council tax increases and defending the existing referendum threshold system as a balance between local authority flexibility and protecting residents. It does not agree to raise or remove the …
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Ministry of Housing, Communities and Local Government
6
Conclusion
Third Report - Financial distress in lo…
Acknowledged
We have previously recommended that the Government widens the funding base of local authorities and grants more flexibility over local taxes and other revenue raising powers. We therefore welcome the Government’s call for views on local authority capital flexibilities and believe that additional flexibilities may play a useful role in …
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We have previously recommended that the Government widens the funding base of local authorities and grants more flexibility over local taxes and other revenue raising powers. We therefore welcome the Government’s call for views on local authority capital flexibilities and believe that additional flexibilities may play a useful role in enabling local authorities to support themselves in times of financial distress.
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Government response AI summary
The government confirms it launched a call for views on local authority capital flexibilities to encourage invest-to-save activity and is considering responses. A publication is expected before the summer recess, and some financial flexibilities have been agreed with specific councils.
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Ministry of Housing, Communities and Local Government
7
Conclusion
Third Report - Financial distress in lo…
Deferred
However, local authorities’ use of capital funding for revenue expenditure is not sustainable and at best it can only be a temporary solution to short-term financial pressures. We have concerns that the Government, if it does grant these additional flexibilities, may delay its engagement with the more fundamental reforms to …
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However, local authorities’ use of capital funding for revenue expenditure is not sustainable and at best it can only be a temporary solution to short-term financial pressures. We have concerns that the Government, if it does grant these additional flexibilities, may delay its engagement with the more fundamental reforms to the Financial distress in local authorities 43 funding system which we believe are urgently required. There is a risk that local authorities, in using these flexibilities, are drawn into fire sales of local assets, or unsustainable borrowing, in attempts to bridge their chronic budget gaps. This could drive poor value for money for local authorities and their communities, and exacerbate existing financial distress.
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Government response AI summary
The government has launched a call for views on options for capital resource flexibility and will publish a response before summer recess, while affirming that existing exceptional financial support via capitalisation directions is only for specific local issues.
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Ministry of Housing, Communities and Local Government
8
Recommendation
Third Report - Financial distress in lo…
Acknowledged
The Government should ensure that the implications of any additional flexibilities it grants on capital funding are carefully considered. We recommend that these are limited to extending flexibilities over invest-to-save activity only. The Government must closely monitor local authorities’ uptake of these flexibilities and act quickly to work with local …
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The Government should ensure that the implications of any additional flexibilities it grants on capital funding are carefully considered. We recommend that these are limited to extending flexibilities over invest-to-save activity only. The Government must closely monitor local authorities’ uptake of these flexibilities and act quickly to work with local authorities in preventing unintended negative consequences. The use of capital funding for revenue expenditure must not become business as usual and is not a sufficient substitute for more fundamental reform of the funding system.
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Government response AI summary
The government states it is considering responses to its call for views on capital flexibilities, acknowledging the need for balance to prevent unsustainable financial practices. It will publish a response before the summer recess but does not commit to the specific limitations or monitoring mechanisms …
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Ministry of Housing, Communities and Local Government
9
Conclusion
Third Report - Financial distress in lo…
Accepted
The business rates system is overly complex, outdated and in urgent need of reform. The baselines used in the business rates retention scheme are over 10 years out of date and their continued use is causing a significant misalignment between the level of funding distributed to local authorities and those …
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The business rates system is overly complex, outdated and in urgent need of reform. The baselines used in the business rates retention scheme are over 10 years out of date and their continued use is causing a significant misalignment between the level of funding distributed to local authorities and those authorities’ spending needs. There is a disproportionately negative impact on those authorities in the most deprived parts of the country. The Government committed to a Fair Funding Review for local government in 2016 but is still to deliver on this commitment and it is not clear to us that it will do so.
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Government response AI summary
The government states it completed a review in 2021 and passed the Non-Domestic Rating Act 2023. It will not reset the business rates retention system before 2025-26, but agrees to consider further improvements in the next Parliament.
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Ministry of Housing, Communities and Local Government
10
Recommendation
Third Report - Financial distress in lo…
Deferred
We renew our previous recommendation that the Government implements the business rates reset and Fair Funding Review. This should include transitional arrangements to ensure stability in funding levels after reset and review. The Government must commit to a fundamental long-term review of the business rates system to ensure business taxation …
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We renew our previous recommendation that the Government implements the business rates reset and Fair Funding Review. This should include transitional arrangements to ensure stability in funding levels after reset and review. The Government must commit to a fundamental long-term review of the business rates system to ensure business taxation is fit for a modern economy. (Paragraph 63) Social Care
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Government response AI summary
The government states the business rates retention system reset will not happen before 2025-26 due to sector calls for stability, thereby deferring its implementation. It also acknowledges the need for improvements in the local government finance landscape and commits to considering further improvements in the …
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Ministry of Housing, Communities and Local Government
11
Conclusion
Third Report - Financial distress in lo…
Accepted
We agree with the Government that comprehensive reform of the children’s social care system is urgent and necessary. We are concerned, however, at the receding prospect of timely delivery of reforms and note that, despite the additional funding that the Government announced in autumn 2022, the Government’s plans do not …
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We agree with the Government that comprehensive reform of the children’s social care system is urgent and necessary. We are concerned, however, at the receding prospect of timely delivery of reforms and note that, despite the additional funding that the Government announced in autumn 2022, the Government’s plans do not provide sufficient short-term financial support to local authorities to enable them to maintain the quality of services that vulnerable people need and deserve. As the CMA has noted, there is a need to ensure profits made by private sector firms from public sector services are not “materially higher than” expected, and are appropriate and fair to the services provided.
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Government response AI summary
The government agrees on the urgency of children's social care reform and has provided £1.5 billion in additional grant for social care for 2024-25, including a recent £500 million uplift. It also committed £165 million over four years to expand children's home capacity and is …
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Ministry of Housing, Communities and Local Government
12
Recommendation
Third Report - Financial distress in lo…
Accepted
The Government must work urgently with local authorities to better understand their short-term budgetary pressures in this area and work to develop a package of support and funding to enable continued service delivery while wider system reforms are implemented. (Paragraph 77) 44 Financial distress in local authorities
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The Government must work urgently with local authorities to better understand their short-term budgetary pressures in this area and work to develop a package of support and funding to enable continued service delivery while wider system reforms are implemented. (Paragraph 77) 44 Financial distress in local authorities
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Government response AI summary
The government agrees on the urgency of children's social care reform and has announced £1.5 billion in additional grant funding for social care for 2024-25, including a recent £500 million uplift. It also committed £165 million over four years to expand children's home capacity and …
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Ministry of Housing, Communities and Local Government
13
Recommendation
Third Report - Financial distress in lo…
Accepted
The Government should support local authorities by reviewing possible ways of facilitating greater collaboration across local authorities so that they can collectively deliver more children’s care services directly rather than through private suppliers.
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The Government should support local authorities by reviewing possible ways of facilitating greater collaboration across local authorities so that they can collectively deliver more children’s care services directly rather than through private suppliers.
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Government response AI summary
The government commits to supporting greater collaboration among local authorities for collectively delivering care services, citing ongoing co-design work and the Regional Care Cooperative pathfinder programme. It also provided capital funding to increase local authority provision and will publish proposals to combat profiteering later this …
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Ministry of Housing, Communities and Local Government
14
Conclusion
Third Report - Financial distress in lo…
Accepted
While the additional funding announced in Autumn Statement 2022 has provided some brief respite for local authorities facing particularly acute pressures, a consistent and sustainable increase in funding is required. We have heard evidence of ongoing concerns about the continuing cost and demand pressures affecting adult social care. The absence …
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While the additional funding announced in Autumn Statement 2022 has provided some brief respite for local authorities facing particularly acute pressures, a consistent and sustainable increase in funding is required. We have heard evidence of ongoing concerns about the continuing cost and demand pressures affecting adult social care. The absence of any additional funding announced in the Autumn Statement 2023, and the prospect of future real terms funding cuts, has exacerbated those concerns.
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Government response AI summary
The government details significant additional funding of up to £8.6 billion over two years and £1.5 billion in grant increases for 2024-25 for adult social care, arguing this addresses the pressures and enables local authorities to improve services.
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Ministry of Housing, Communities and Local Government
15
Recommendation
Third Report - Financial distress in lo…
Accepted
We reiterate the recommendation we made in our July 2022 report Long-term Funding of Adult Social Care, that the Government needs to recognise the need for more funding to local authorities for delivery of adult social care, in the order of several billions each year, and to plan a sustainable …
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We reiterate the recommendation we made in our July 2022 report Long-term Funding of Adult Social Care, that the Government needs to recognise the need for more funding to local authorities for delivery of adult social care, in the order of several billions each year, and to plan a sustainable mechanism to deliver this funding, for example through the social care premium recommended by our predecessor committee in 2018.
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Government response AI summary
The government has recognized the pressures in adult social care, making available up to £8.6 billion of additional funding over two years, including over £1.5 billion in new grants for 2024-25, to support local authorities in delivering social care.
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Ministry of Housing, Communities and Local Government
16
Recommendation
Third Report - Financial distress in lo…
Rejected
We also reiterate the recommendation we made in our July 2022 report for the Government to publish a 10-year plan for implementing the reforms set out in its white paper People at the Heart of Care. (Paragraph 95) Chapter 4: Special Educational Needs and Disabilities (SEND)
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We also reiterate the recommendation we made in our July 2022 report for the Government to publish a 10-year plan for implementing the reforms set out in its white paper People at the Heart of Care. (Paragraph 95) Chapter 4: Special Educational Needs and Disabilities (SEND)
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Government response AI summary
The government rejects the recommendation to publish a 10-year plan for adult social care reforms, stating that such plans are subject to future Spending Reviews and fiscal events which prevent long-term funding certainty. It highlights its 'Next steps to put people at the heart of …
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Ministry of Housing, Communities and Local Government
17
Conclusion
Third Report - Financial distress in lo…
Accepted
The rise in numbers of EHC plans following the Children and Families Act 2014 has significantly increased demand for more costly forms of SEND provision and home to school transport. The funding available to local authorities, through the Dedicated Schools Grant or otherwise, is far from sufficient to meet this …
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The rise in numbers of EHC plans following the Children and Families Act 2014 has significantly increased demand for more costly forms of SEND provision and home to school transport. The funding available to local authorities, through the Dedicated Schools Grant or otherwise, is far from sufficient to meet this demand.
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Government response AI summary
The government agrees on the importance of tackling SEND provision costs, highlighting a 60% rise in the high needs budget to £10.5 billion by 2024-25, and detailing support programmes like Safety Valve and Delivering Better Value with £1 billion in additional funding to help local …
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Ministry of Housing, Communities and Local Government
18
Conclusion
Third Report - Financial distress in lo…
Accepted
The Government’s use of the statutory override and one-off ‘safety valve’ funding are temporary measures and do not address the underlying mismatch between demand, costs, and annual Dedicated Schools Grant funding. They will not prevent local authorities from accumulating further deficits until the underlying mismatch is resolved, and we do …
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The Government’s use of the statutory override and one-off ‘safety valve’ funding are temporary measures and do not address the underlying mismatch between demand, costs, and annual Dedicated Schools Grant funding. They will not prevent local authorities from accumulating further deficits until the underlying mismatch is resolved, and we do not believe it is realistic to expect local authorities to manage down deficits of the scale of many billions of pounds in total over a period of two or three years. Without significant additional funding via the DSG to match service demand and costs, or a further extension to the statutory override - which would, at most, offer a further period of temporary respite - the sector faces a cliff-edge of section 114 notices.
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Government response AI summary
The government acknowledges the concern about funding mismatches but states it is already addressing the issue through significant increases to the high needs budget, existing Safety Valve and Delivering Better Value in SEND programmes with additional funding, and published guidance.
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Ministry of Housing, Communities and Local Government
19
Conclusion
Third Report - Financial distress in lo…
Not Addressed
The Government has provided no clarity on whether it will fund, or it will expect local authorities to fund, deficits remaining when the statutory override ends in March 2026.
Government response AI summary
The government highlights its commitment to placing local authorities on a sustainable financial footing regarding SEND provision, detailing ongoing Safety Valve and Delivering Better Value in SEND programmes with funding and expert support to help LAs eliminate deficits. However, it does not provide clarity on …
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Ministry of Housing, Communities and Local Government
20
Conclusion
Third Report - Financial distress in lo…
Accepted
It is clear that the Government’s aim to improve existing mainstream and locally available special school provision will not be sufficient on its own to influence parents’ Financial distress in local authorities 45 or carers’ views on Education, Health and Care plans. The development of improved locally available provision will …
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It is clear that the Government’s aim to improve existing mainstream and locally available special school provision will not be sufficient on its own to influence parents’ Financial distress in local authorities 45 or carers’ views on Education, Health and Care plans. The development of improved locally available provision will also take time to realise and is not likely to address the financial pressures affecting local authorities in the short-term.
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Government response AI summary
The government highlights its existing efforts, including the SEND Green Paper and Improvement Plan, which aim to establish a single national system, implicitly addressing concerns about sufficiency and timing, and stating a further review is unnecessary.
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Ministry of Housing, Communities and Local Government
21
Recommendation
Third Report - Financial distress in lo…
Accepted
The Government should provide clarity to local authorities on its specific expectations for resolving existing DSG budget deficits, and agree with local authorities a set of realistic and achievable steps, supplemented by sufficient additional funding, for eliminating these existing budget deficits. This should be done by 31 March 2024.
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The Government should provide clarity to local authorities on its specific expectations for resolving existing DSG budget deficits, and agree with local authorities a set of realistic and achievable steps, supplemented by sufficient additional funding, for eliminating these existing budget deficits. This should be done by 31 March 2024.
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Government response AI summary
The government states it is already working to provide clarity and support to local authorities through existing programmes like Safety Valve and Delivering Better Value in SEND. These programmes involve bespoke support, individualised local plans, and around £1 billion in additional funding to help authorities …
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Ministry of Housing, Communities and Local Government
22
Recommendation
Third Report - Financial distress in lo…
Rejected
The Department should commission a cross-government independent review of Education, Health and Care Plans and consider fundamental reform of this system, to put SEND provision on a financially sustainable footing for local authorities whilst ensuring that all children and young people with SEND have access to the services that they …
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The Department should commission a cross-government independent review of Education, Health and Care Plans and consider fundamental reform of this system, to put SEND provision on a financially sustainable footing for local authorities whilst ensuring that all children and young people with SEND have access to the services that they need. This review should also address provision in mainstream and special schools. Furthermore, the Government, when considering future financial support for local authorities, should assess the future demand for SEND within the wider context of schools as part of the Dedicated Schools Grant funding.
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Government response AI summary
The government rejects the recommendation for a new independent review, stating that a comprehensive SEND Review has already been completed, leading to a Green Paper and an Improvement Plan, making a further review unnecessary.
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Ministry of Housing, Communities and Local Government
23
Recommendation
Third Report - Financial distress in lo…
Accepted
Additional funding for home-to-school transport is necessary in the short-term. Therefore, the Government should assess the benefits of introducing new statutory guidance aimed at encouraging the use of less costly forms of shared transportation. In response to this Report, the Government should set out the results of this assessment in …
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Additional funding for home-to-school transport is necessary in the short-term. Therefore, the Government should assess the benefits of introducing new statutory guidance aimed at encouraging the use of less costly forms of shared transportation. In response to this Report, the Government should set out the results of this assessment in full. (Paragraph 123) Homelessness
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Government response AI summary
The government states existing statutory guidance already empowers local authorities to make suitable travel arrangements and avoid expensive individual transport. It outlines the SEND and Alternative Provision Improvement Plan and investment in new provision that aims to reduce home-to-school travel costs over time, but does …
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Ministry of Housing, Communities and Local Government
24
Conclusion
Third Report - Financial distress in lo…
Accepted
We welcome the Government’s decision to increase Local Housing Allowance rates to the 30th percentile of local market rents from 1 April 2024. However, this is an urgent matter that required the Government’s immediate action. It is therefore disappointing that the Government did not implement this change with greater speed …
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We welcome the Government’s decision to increase Local Housing Allowance rates to the 30th percentile of local market rents from 1 April 2024. However, this is an urgent matter that required the Government’s immediate action. It is therefore disappointing that the Government did not implement this change with greater speed following the Autumn Statement in November 2023. We are concerned that this delay has failed to alleviate the increasing numbers of families unable to find suitable accommodation during the winter, with serious consequences for the health and wellbeing of those affected.
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Government response AI summary
The government acknowledges the importance of stable housing, confirms the £1.2 billion investment to increase LHA rates to the 30th percentile from April 2024, and commits to annual reviews of LHA rates. It also highlights ongoing funding for Discretionary Housing Payments and wider affordable housing …
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Ministry of Housing, Communities and Local Government
25
Recommendation
Third Report - Financial distress in lo…
Acknowledged
We recommend that the Government reconsider its position on re-freezing local housing allowance rates from 2025–26 onwards. Instead, the Government must maintain LHA rates at least at the 30th percentile of local market rents each year to ensure that those children and adults receiving benefits have sufficient access to rental …
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We recommend that the Government reconsider its position on re-freezing local housing allowance rates from 2025–26 onwards. Instead, the Government must maintain LHA rates at least at the 30th percentile of local market rents each year to ensure that those children and adults receiving benefits have sufficient access to rental properties and to prevent further escalation of pressure on local authorities’ homelessness services. (Paragraph 138) Priorities for the next Government
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Government response AI summary
The government acknowledges the importance of stable housing and commits to reviewing Local Housing Allowance rates every year, considering factors like local rents and the broader fiscal context. It highlights the £1.2 billion investment from April 2024 to increase LHA rates to the 30th percentile, …
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Ministry of Housing, Communities and Local Government
26
Conclusion
Third Report - Financial distress in lo…
Acknowledged
The Government elected in the next UK General Election is faced with the task of designing and implementing a series of fundamental reforms to the way in which local authorities are funded, the services that they are currently required to deliver, and the way in which these services are delivered. …
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The Government elected in the next UK General Election is faced with the task of designing and implementing a series of fundamental reforms to the way in which local authorities are funded, the services that they are currently required to deliver, and the way in which these services are delivered. It is critical that the next Government prioritises this matter. (Paragraph 147) 46 Financial distress in local authorities
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Government response AI summary
The government acknowledges the need to improve the local government finance system in the next Parliament and commits to significant consultation, but explicitly states it does not support land value taxation.
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Ministry of Housing, Communities and Local Government
27
Recommendation
Third Report - Financial distress in lo…
Deferred
The next Government must embark on a fundamental review of the system of local authority funding and local taxation, exploring all options for removing its current regressive elements and bringing it into the 21st Century. This should include consideration of land value taxes, and of wider fiscal devolution including the …
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The next Government must embark on a fundamental review of the system of local authority funding and local taxation, exploring all options for removing its current regressive elements and bringing it into the 21st Century. This should include consideration of land value taxes, and of wider fiscal devolution including the option of granting local authorities a specific share of central taxation.
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Government response AI summary
The government commits to improving the local government finance system in the next Parliament, requiring significant consultation, but explicitly rejects the consideration of land value taxation.
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Ministry of Housing, Communities and Local Government
28
Recommendation
Third Report - Financial distress in lo…
Accepted
The next Government must ensure that it explores all options for fundamental reform of funding and delivery of social care services and implements reforms that address the underlying causes of the acute funding and delivery pressures that local authorities are currently facing. The Government should also explore how the structure …
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The next Government must ensure that it explores all options for fundamental reform of funding and delivery of social care services and implements reforms that address the underlying causes of the acute funding and delivery pressures that local authorities are currently facing. The Government should also explore how the structure of local authorities, including for example moving to unitary authorities, may alleviate financial pressures currently facing local authorities. (Paragraph 149) Financial distress in local authorities 47
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Government response AI summary
The government outlines its ongoing commitment to extensive system-wide social care reform, citing the People at the Heart of Care white paper, £700 million investment for adult social care, new CQC assessments, and £200 million for children's social care reforms through Pathfinders.
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Ministry of Housing, Communities and Local Government