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Select Committee · Housing, Communities and Local Government Committee

Financial distress in local authorities

Status: Closed Opened: 2 Nov 2023 Closed: 19 Mar 2024 15 recommendations 13 conclusions 1 report

Since 2018 eight English local authorities have issued section 114 notices. The results can be significant for local service delivery and local democracy. Various sources continue to report that other authorities are financially unsustainable and are at risk issuing a section 114 notice. This inquiry examines the current landscape of financial resilience in local authorities … Show more

Clear

Reports

1 report
Title HC No. Published Items Response
Third Report - Financial distress in local authorities HC 56 1 Feb 2024 28 Responded

Recommendations & Conclusions

2 items
1 Conclusion Third Report - Financial distress in lo… Accepted in Part

Local authorities face systemic underfunding and £4 billion gap from demand and inflation.

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 … Read more

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

Include additional funding in 2024–25 settlement to bridge local authorities' £4bn gap, outlining prioritisation.

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- … Read more

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

Oral evidence sessions

4 sessions
Date Witnesses
6 Dec 2023 Joanna Key · Department for Levelling Up, Housing and Communities, Nico Heslop · Ministry of Housing, Communities and Local Government, Rt Hon Michael Gove · Department for Levelling Up, Housing and Communities View ↗
20 Nov 2023 Nico Heslop · Ministry of Housing, Communities and Local Government, Simon Hoare MP · Department for Levelling Up, Housing and Communities View ↗
13 Nov 2023 Abdool Kara · National Audit Office, Bob Watson · Surrey Heath Borough Council, Gary Fielding · North Yorkshire Council, Jonathan Carr-West · Local Government Information Unit, Lorna Baxter · Association of Local Authorities’ Treasurer Societies, Mr David Phillips · Institute for Fiscal Studies, Paul Dossett · Grant Thornton, Steve Thompson · Blackpool Council View ↗
8 Nov 2023 Councillor Barry Lewis · County Councils Network, Councillor Claire Holland · London Councils, Councillor Graham Chapman · SIGOMA, Councillor John Fuller OBE · Local Government Association, Councillor Sam Chapman-Allen · District Councils Network, Stephen Jones · Core Cities UK View ↗

Who gave evidence

18 witnesses
WitnessOrganisationSessions
Nico Heslop · Director of Local Government Finance Ministry of Housing, Communities and Local Government 2
Abdool Kara · Executive Director National Audit Office 1
Bob Watson · Section 151 officer Surrey Heath Borough Council 1
Councillor Barry Lewis · CCN Spokesperson for Finance, and Leader of Derby… County Councils Network 1
Councillor Claire Holland · Chair, Transport and Environment Committee London Councils 1
Councillor Graham Chapman · Vice Chair SIGOMA 1
Councillor John Fuller OBE · Vice Chair, Economy and Resources Board Local Government Association 1
Councillor Sam Chapman-Allen · Chair District Councils Network 1
Gary Fielding · Section 151 officer North Yorkshire Council 1
Joanna Key · Director General, Regeneration, Housing and Plann… Department for Levelling Up, Housing and Communities 1
Jonathan Carr-West · Chief Executive Local Government Information Unit 1
Lorna Baxter · President Association of Local Authorities’ Treasurer Societies 1
Mr David Phillips · Associate Director Institute for Fiscal Studies 1
Paul Dossett · Partner and Head of Public Sector Assurance Londo… Grant Thornton 1
Rt Hon Michael Gove · Secretary of State Department for Levelling Up, Housing and Communities 1
Simon Hoare MP · Parliamentary Under-Secretary of State Department for Levelling Up, Housing and Communities 1
Stephen Jones · Director Core Cities UK 1
Steve Thompson · Section 151 officer Blackpool Council 1

Correspondence

6 letters
DateDirectionTitle
14 May 2024 To cttee Letter from the Chair to the Parliamentary Under Secretary of State for Local G…
14 Dec 2023 To cttee Letter from the Chair to the Secretary of State dated 13 December 2023 concerni…
5 Dec 2023 To cttee Letter from the Chair to Chartered Institute of Public Finance and Accountancy …
5 Dec 2023 To cttee Letter from CIPFA, relating to Financial Distress in Local Authorities, dated 3…
5 Dec 2023 To cttee Letter from Councillor Susan Hinchcliffe relating to Financial Distress in Loca…
28 Nov 2023 To cttee Letter from the Chair to the Secretary of State dated 27 November concerning Fi…