Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 50
50
Deferred
Amend the section 114 process to mitigate long-term financial pressure from single-year budget deficits.
Recommendation
The Government must amend the section 114 process so that an inability to set a balanced budget in a single year because of financial pressure does not cause long-term additional financial pressure. This could be done by extending the requirements to a rolling two-year basis (that is, allowing councils to recoup losses in the following year), by incorporating the year- end accounts into the criteria (that is, ensuring councils are actually making a loss instead of merely expecting to), or by easing the use of some reserves to fill funding gaps. (Recommendation, Paragraph 192) 80
Government Response Summary
The government acknowledges the potential benefits of financial flexibilities and has invited views on the matter through the FFR 2.0 consultation, promising further details in the autumn.
Government Response
Deferred
HM Government
Deferred
Section 114 notices exist within a wider system of checks and balances that highlight local authority financial risk. Government recognises that, in some cases, financial flexibilities can help enable local authorities to manage budgetary pressures over a multi-year period, for example in managing unexpected pressures that arise. However it is important that any financial flexibilities are balanced with the aim of supporting long term sustainability and ensuring Value for Money. Through the FFR 2.0 consultation, we invited views on how financial flexibilities could support local authorities in the context of reform, during the transitional period . We will set out further detail on this in the autumn.