Home / Sources / Select Committees / Housing, Communities and Loca… / Financial distress in local authorities
Index live
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

4 items
6 Conclusion Third Report - Financial distress in lo… Acknowledged

Additional capital flexibilities could help local authorities during financial distress.

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 … Read more

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.
Read full response →
Ministry of Housing, Communities and Local Government
8 Recommendation Third Report - Financial distress in lo… Acknowledged

Limit capital funding flexibilities to invest-to-save and closely monitor uptake for unintended consequences.

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 … Read more

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 …
Read full response →
Ministry of Housing, Communities and Local Government
25 Recommendation Third Report - Financial distress in lo… Acknowledged

Maintain Local Housing Allowance rates at 30th percentile of market rents annually

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 … Read more

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, …
Read full response →
Ministry of Housing, Communities and Local Government
26 Conclusion Third Report - Financial distress in lo… Acknowledged

Prioritise fundamental reforms for local authority funding and service delivery systems

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. … Read more

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.
Read full response →
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…