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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

3 items
7 Conclusion Third Report - Financial distress in lo… Deferred

Using capital funding for revenue is unsustainable, risking asset sales and delaying reforms.

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 … Read more

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
10 Recommendation Third Report - Financial distress in lo… Deferred

Implement business rates reset and Fair Funding Review; commit to long-term reform.

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 … Read more

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
27 Recommendation Third Report - Financial distress in lo… Deferred

Review local authority funding and taxation, including land value taxes and fiscal devolution

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 … Read more

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

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…