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

5 items
3 Conclusion Third Report - Financial distress in lo… Rejected

Council tax is outdated, regressive, and disproportionately impacts deprived local authorities' funding.

There is widespread agreement that Council tax is outdated, regressive, and long overdue for reform.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 … Read more

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

Urgently reform council tax by revaluing properties and introducing additional bands.

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 … Read more

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

Raise council tax referendum threshold in line with inflation; consider its long-term removal.

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
16 Recommendation Third Report - Financial distress in lo… Rejected

Publish a 10-year plan to implement reforms from People at the Heart of Care white paper.

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) Read more

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
22 Recommendation Third Report - Financial distress in lo… Rejected

Commission independent review of EHC Plans for fundamental reform and financially sustainable SEND provision.

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 … Read more

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

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…