Select committee: Housing, Communities and Local Government Committee
Recommendation 58
2nd Report - The Funding and Sustainability of Local Government Finance
Published 23 Jul 2025
Addressed to Ministry of Housing, Communities and Local Government
Housing, Communities and Local Government Committee The Funding and Sustainability of Local Government Finance All items in this report Report on parliament.uk ↗ Inquiry on parliament.uk ↗
Recommendation (the committee's words)
The Ministry must act on other recommendations from the predecessor Committee’s report on Financial Reporting and Audit in Local Authorities that have not yet been addressed. Specifically, the Ministry should work with the organisation that prepares the Audit Code (currently the National Audit Office, transferring to the Local Audit Office when it is set up) to ensure that local auditors’ opinions over value for money include an actual assessment of value for money achieved (not merely whether appropriate arrangements exist), to assess the benefits of decoupling value for money work from financial audit work, and to encourage local auditors to make more proactive use of existing powers to raise early warnings. (Recommendation, Paragraph 217) 82
From: Housing, Communities and Local Government Committee, 2nd Report - The Funding and Sustainability of Local Government Finance (HC 514), 23 July 2025
Government response
The government responded to the whole report on 21 October 2025 (deadline 23 September 2025).
Summary written by Accountability Index from the government's response. It is not the government's own words.The government accepts the case for reform of local government finance but declines several of the Committee's specific recommendations, setting out its own reforms centred on the Fair Funding Review 2.0 and a multi-year settlement for 2026-27.
- On council tax, the government "does not accept" the recommendation to devolve full responsibility for setting it to individual councils "at this time", noting that councils already set levels and have discretionary powers over discounts and premiums.
- On the New Burdens Doctrine, the government says placing it on a statutory footing "would reduce its effectiveness", but it is reviewing and updating the Doctrine.
- On ringfencing, it intends to bring grants together into "large ringfenced consolidated grants" and to roll suitable grants into the Revenue Support Grant, rather than end ringfencing.
- On outcomes-based accountability, the final Framework will be published alongside the provisional 2026-27 Settlement, and it expects to use it from April 2026.