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Source · Select Committees · Housing, Communities and Local Government Committee

2nd Report - The Funding and Sustainability of Local Government Finance

Housing, Communities and Local Government Committee HC 514 Published 23 July 2025
Report Status
Government responded
Conclusions & Recommendations
58 items (22 recs)
Government Response
AI assessment · 58 of 58 classified
Accepted 12
Accepted in Part 4
Acknowledged 6
Deferred 24
Not Addressed 3
Rejected 9
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Recommendations

22 results
2 Accepted

Publish a clear vision for local government's role in the state by end of 2025.

Recommendation
The Government must assess the role of local government and, by the end of 2025, publish its vision for local government’s role in the state, including whether they see its role changing as a result of reorganisation and devolution to … Read more
Government Response Summary
The government announced a review of statutory duties placed on local government, launched on 3 July 2025, which will explore simplification and improvement of requirements over approximately one year, with recommendations to be tested with councils.
Ministry of Housing, Communities and Local Government
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4 Deferred

Undertake a review of local government statutory service requirements by the end of 2025.

Recommendation
The Government must undertake a review of which local government services should, and which should not, be statutory requirements. This review must begin by the end of calendar year 2025 and go to consultation by June 2026. If changes are … Read more
Government Response Summary
The government's response focused on ongoing and planned reforms for specific services like children's social care, SEND, and homelessness, including funding commitments and upcoming strategies/white papers, rather than committing to a review of which services should be statutory requirements.
Ministry of Housing, Communities and Local Government
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7 Accepted

Appoint a single Minister accountable for each mandatory local government service across departments.

Recommendation
We support the calls by the National Audit Office and Public Accounts Committee that the Government must provide cross-government reform to ensure that the entire system of local government is sustainable. The Ministry must collaborate with other departments on this … Read more
Government Response Summary
The government committed to further funding simplification for 2026–27, intending to consolidate grants from across government into large ringfenced grants delivered via the Settlement and rolling suitable grants into the Revenue Support Grant, building on previous consolidations.
Ministry of Housing, Communities and Local Government
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8 Deferred

Provide further clarity on service reforms' implementation and success measurement for prevention initiatives.

Recommendation
The Government has committed over £1.5 billion from the Transformation Fund to reform adult social care, children’s social care, SEND, and homelessness services so that they are focused on prevention. Reforms to these services are urgently needed, but the Government … Read more
Government Response Summary
The government's response detailed the consolidation of capital funds into a new Local Regeneration Fund and a commitment to move towards allocative funding, but did not provide clarity on the implementation and measurement of reforms for adult social care, children's social care, SEND, and homelessness services as requested.
Ministry of Housing, Communities and Local Government
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23 Accepted

Compensate councils fully for additional costs from increased employer National Insurance Contributions

Recommendation
The Government must fully compensate councils for the additional costs arising from the increase to employer National Insurance Contributions. (Recommendation, Paragraph 82)
Government Response Summary
The Government did not commit to fully compensating councils for increased NICs, instead detailing over £5 billion in new grant funding, a 2.6% real terms increase in Core Spending Power, and planned funding reforms from 2026-27, alongside new Mayoral fiscal powers.
Ministry of Housing, Communities and Local Government
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27 Deferred

Accelerate adult social care commission timescale and fully fund sector by Parliament's end

Recommendation
The timescale for the commission into adult social care should be brought forward, and it must present actionable reforms to the sector as part of its interim findings in 2026. The Government must not wait for the commission to publish … Read more
Government Response Summary
The Government did not address speeding up the social care commission or fully funding adult social care, instead discussing local authorities' responsibility for workforce management and financial training for councillors and officers.
Ministry of Housing, Communities and Local Government
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30 Deferred

Eliminate local authority DSG deficits by 2028 and develop approach for historical shortfalls

Recommendation
The Government’s upcoming reforms to the Special Educational Needs and Disabilities (SEND) system must be bold enough to eliminate local authorities’ deficits on the DSG going forwards before March 2028, while ensuring SEND children receive the support they need. The … Read more
Government Response Summary
The government acknowledges DSG deficits and confirms funding for SEND reform, with a White Paper expected soon. It states the statutory override is extended to 2027-28 and promises more detail and a plan for supporting local authorities with historic and accruing deficits in the coming months.
Ministry of Housing, Communities and Local Government
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32 Not Addressed

Consider options for reforming and improving efficiency of home-to-school transport services

Recommendation
As part of its ongoing service reform for the SEND sector, the Ministry must consider options for reforming or improving the efficiency of home-to-school transport services. Potential options include wider use of sharing transport, and capital investment to enable councils … Read more
Government Response Summary
The government attributes rising transport costs to challenges in the wider SEND system and outlines significant funding for SEND reform and capital for school facilities, which it states will indirectly reduce the need for long journeys, but does not directly address reforming or improving the efficiency of home-to-school transport services.
Ministry of Housing, Communities and Local Government
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34 Accepted in Part

Reconsider freeze on Local Housing Allowance rates and extend support for housing acquisition

Recommendation
As we recommended in our previous report, England’s Homeless Children, the Government should reconsider its decision to freeze Local Housing Allowance rates and should extend its support for local authorities to acquire new housing stock through the Local Authority Housing … Read more
Government Response Summary
The government confirms it will not reconsider freezing Local Housing Allowance rates, citing fiscal context and prioritization of other support funds. However, it accepts the recommendation to extend support for the Local Authority Housing Fund, announcing £950 million in capital for its fourth round, running until 2030.
Ministry of Housing, Communities and Local Government
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37 Accepted in Part

Require the new funding formula to consider sub-ward disparities and local housing costs.

Recommendation
The Government’s new funding formula must consider the effect of disparities between wards and sub-wards within single local authorities, which can be hidden when only considering the data at the level of whole local authorities. Measures of deprivation used in … Read more
Government Response Summary
The government states its needs assessments vary in granularity and that MHCLG is working with DWP to incorporate housing costs into the 2025 Index of Multiple Deprivation, with a final decision on its inclusion to be made in the autumn.
Ministry of Housing, Communities and Local Government
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42 Rejected

Begin overhauling or replacing council tax, clarifying its purpose, impact, and fairness.

Recommendation
The Government should begin the process of overhauling or replacing council tax. This should look at options for a significant reform of local government funding, which could include replacing council tax. Whatever form of taxation is eventually adopted, the Government … Read more
Government Response Summary
The government notes the recommendation to reform or replace council tax but provides no commitment to begin such a process, stating that tax policy decisions are made by the Chancellor at fiscal events.
Ministry of Housing, Communities and Local Government
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43 Rejected

Devolve power to councils to revalue properties, set bands, and apply council tax discounts.

Recommendation
A significant and considered reform of council tax will take several years to take effect. Until it does, the Government should devolve power and responsibility for setting council tax to councils. This should include the power for individual councils to … Read more
Government Response Summary
The government explicitly rejects devolving full responsibility for setting council tax to individual councils at this time, stating that council tax is already localized with existing discretionary powers for local authorities.
Ministry of Housing, Communities and Local Government
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45 Accepted in Part

Design business rates system to incentivise councils to encourage local economic growth.

Recommendation
The business rates system, or any alternative tax system for business property, must be designed to incentivise councils to encourage growth in their areas. We are concerned that any full, cliff-edge reset of business rates will reduce this incentive by … Read more
Government Response Summary
The government acknowledges concerns about cliff-edges, stating it will design transitional arrangements for the 2026 reset and will not reset the system again during the current multi-year settlement. It defers the timing and design of the next reset to a later period, allowing for consideration of phased resets.
Ministry of Housing, Communities and Local Government
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46 Rejected

Devolve more powers to local authorities for setting business rates multipliers and discounts.

Recommendation
The Government must devolve more powers to local authorities to set multipliers, discounts and premiums relating to business rates. (Recommendation, Paragraph 170)
Government Response Summary
The government rejects devolving more powers to local authorities for setting business rates multipliers, citing the need for national certainty and highlighting existing powers councils have for reliefs and supplements.
Ministry of Housing, Communities and Local Government
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47 Deferred

Implement a phased business rates reset to prevent cliff-edges for local authorities.

Recommendation
Pending a fuller reform of the business rates system, business rates resets must avoid cliff-edges for local authorities by means of a phased reset, by which growth is reset to a fixed prior period, say seven years before the date … Read more
Government Response Summary
The government acknowledges concerns about cliff-edges and will consider transitional arrangements for the 2026 reset, but defers a decision on a phased reset mechanism, stating it will confirm the timing and design of the next reset by the end of the next multi-year settlement period.
Ministry of Housing, Communities and Local Government
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48 Accepted in Part

Devolve comprehensive tax-setting powers to local authorities, including for new local taxes.

Recommendation
The Government must be more courageous with its long-term plans for the funding of local government. While stabilisation is important in the short term, both the Ministry and HM Treasury need to start considering how to get the sector back … Read more
Government Response Summary
The government has committed new grant funding and plans fundamental funding reforms from 2026-27, while also advancing measures through a Bill to empower Mayors with fiscal powers, including the ability to charge a Mayoral Community Infrastructure Levy (CIL) and add a council tax precept.
Ministry of Housing, Communities and Local Government
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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 … Read more
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.
Ministry of Housing, Communities and Local Government
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52 Deferred

End the routine use of capitalisation directions within Exceptional Financial Support for local authorities.

Recommendation
The Government should aim to end the use of capitalisation directions as a standard part of EFS. Alternative measures to support local authorities must improve local government sustainability not only in the short term, but in the long term as … Read more
Government Response Summary
The government has invited views on transitional arrangements and financial flexibilities as part of a consultation and will set out further detail on an updated support framework in the autumn, without explicitly committing to ending capitalisation directions.
Ministry of Housing, Communities and Local Government
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54 Accepted

Publish supporting information demonstrating necessity and form of new Exceptional Financial Support cases.

Recommendation
When the Ministry announces new cases of EFS, it must publish alongside its announcement sufficient supporting information to demonstrate how it determined that EFS was necessary, how much it would provide, and what form it would take. This published information … Read more
Government Response Summary
The government states it already maintains transparency regarding EFS and publishes external assurance reviews, which cover the reasons, assessment, and amount of support, on GOV.UK.
Ministry of Housing, Communities and Local Government
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55 Rejected

Mandate minimum financial training for all councillors and statutory officers.

Recommendation
The Government must mandate a minimum level of financial training for all councillors and statutory officers, so that all councillors are at least able to understand their council’s financial accounts and use them to compare their actual performance with the … Read more
Government Response Summary
The government rejects mandating financial training, stating it is the responsibility of local authorities, but highlights its funding of the LGA's Sector Support Programme, which already provides financial training for councillors and officers.
Ministry of Housing, Communities and Local Government
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57 Accepted

Review the purpose and requirements of local audit for proportionality and public value

Recommendation
The Ministry must review the purpose and requirements of local audit to ensure that they are proportionate and deliver maximum value for the public and users of the accounts. There must be clarity about the purpose of local audit, and … Read more
Government Response Summary
The government has published a strategy setting out local audit's purpose, established the Local Audit Office, laid statutory instruments for proportionality, and committed to review local authority accounts by April 2025 to ensure they deliver value.
Ministry of Housing, Communities and Local Government
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58 Deferred

Require local auditors' opinions to assess actual value for money and provide early warnings

Recommendation
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 … Read more
Government Response Summary
The government commits to a post-implementation review of the Code of Audit Practice by the end of 2027, which will consider expanding VFM assessments, and notes that the LAO's responsibilities include championing auditors' early warning powers.
Ministry of Housing, Communities and Local Government
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Conclusions (36)

Observations and findings
1 Conclusion Acknowledged
The Government is undergoing the most significant local government reorganisation in decades. Substantial change, if not driven by a clear vision of what local government should be for and should be achieving, risks embedding undesirable elements of the current system into local government for the foreseeable future. (Conclusion, Paragraph 15)
Government Response Summary
The government acknowledged the importance of strong local government, referencing a statement by the former Deputy Prime Minister on building a modern state, and committed to continuing engagement with councils on necessary reforms, including funding.
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3 Conclusion Accepted
The statutory and non-statutory responsibilities of local government have not been reviewed holistically for many years, contributing to the fragmented system of requirements that local authorities are required to deliver. What is needed to satisfy statutory requirements is too often unclear, which causes confusion and leads to inconsistency between service …
Government Response Summary
The government is coordinating a programme of local government finance reform (FFR 2.0) which will implement an updated assessment of local need following consultation, and will set out its proposed approach to reviewing the sales, fees, and charges system in the Autumn consultation response.
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5 Conclusion Accepted
Decisions made by departments other than the Ministry can have a significant impact on services delivered through local government, and it is local authorities and residents that must bear the brunt of the impact. 73 For example, those affected by welfare cuts such as the freezing of Local Housing Allowance …
Government Response Summary
The government recognizes the importance of a cross-government approach to local government financial sustainability and is coordinating various cross-government reforms, including finance reform, funding simplification, and a review of sales, fees, and charges, with a regular cross-departmental review group informing decisions.
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6 Conclusion Accepted
The Ministry is in regular contact with other departments and government bodies about the needs of local government, but it lacks the levers that it needs to control decisions across central government. In our view, merely discussing the issues with other departments is not enough. To properly reform and stabilise …
Government Response Summary
The government announced the Local Government Outcomes Framework (LGOF) on 3 July 2025, which will be published alongside the provisional Local Government Finance Settlement for 2026–27, and will be actively used from April 2026 to guide outcome-based accountability.
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9 Conclusion Accepted
We support the Government’s current stated intention to focus more on prevention to reduce the demand for more expensive acute services in the long term. These preventative services have been weakened by a decade of underfunding in local government. However, bolstering preventative services must not come at the expense of …
Government Response Summary
The government plans to radically simplify the grant landscape for local authorities in 2026–27 by consolidating grants across various service areas into large, multi-year grants delivered through the Local Government Finance Settlement (LGFS) and rolling suitable grants into the Revenue Support Grant.
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10 Conclusion Acknowledged
Rebuilding and strengthening damaged preventative services will require temporary increases in central government funding before the demand for acute services starts to drop. (Conclusion, Paragraph 49)
Government Response Summary
The government is reviewing and updating the New Burdens Doctrine to ensure its effectiveness, including considering how to better account for bidding costs and streamline the payment process for councils.
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11 Conclusion Deferred
The Ministry must prioritise funding and support for local preventative services to fix the foundations, reduce the demand for acute services, and bring down costs in the longer term. (Recommendation, Paragraph 50)
Government Response Summary
The government detailed funding allocated at the Autumn Budget 2024 to support the public sector with increased employer National Insurance Contributions, rather than committing to prioritising new funding specifically for local preventative services.
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12 Conclusion Deferred
Successive Governments have relied too much on ringfencing of funding to control the activities of local government. Through ringfencing, the Government has required local authorities to spend their money in specified ways, which may not be the most efficient use of that money in the local context. Local authorities would …
Government Response Summary
The government's response focused on the roles of various departments in the local tax system and plans to move the Valuation Office Agency into HMRC, without addressing the recommendation to move away from ringfencing to an outcomes-based system.
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13 Conclusion Deferred
We are encouraged by the recent launch of the Local Government Outcomes Framework and the beginning of a transition towards an outcomes-based system of accountability for local government, and we look forward to further detail, as it emerges during the call for evidence, about how the Ministry will use the …
Government Response Summary
The government outlined the independent commission into adult social care and detailed various funding and reform initiatives for social care, but did not provide further detail on how the Local Government Outcomes Framework will be used.
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14 Conclusion Deferred
After the conclusion of the Framework’s live call for evidence and before the start of the 2026/27 financial year, the Ministry must implement the agreed outcomes-based system, by which local authorities will be held accountable for achieving the agreed outcomes within their overall budgets and not for meeting spending targets …
Government Response Summary
The government's response detailed ongoing reforms to NHS Integrated Care Boards and efforts to strengthen partnerships between the NHS and local government, rather than committing to implement an outcomes-based accountability system for local government.
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15 Conclusion Deferred
The Ministry must end ringfencing by removing the standard spending requirements that are placed on the funding available to local authorities, whether the funding was provided by Government or collected locally. Spending requirements, such as ringfencing, should only be used in response to financial mismanagement. (Recommendation, Paragraph 64)
Government Response Summary
The government's response focused on funding for Special Educational Needs and Disabilities (SEND) reform and managing associated deficits, rather than addressing the broader recommendation to end ringfencing of local authority funding.
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16 Conclusion Deferred
We welcome the Government’s desire to move away from the competitive bidding process as outlined in the Plan for Neighbourhoods, but further clarity is needed around what alternative funding programmes will replace competitive bidding. (Conclusion, Paragraph 65) 75
Government Response Summary
The government responded by outlining funding and reforms within the Special Educational Needs and Disabilities (SEND) system aimed at reducing home-to-school travel costs, but did not clarify general alternative funding programmes to replace competitive bidding.
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17 Conclusion Deferred
The Ministry must outline how it plans to allocate funding to local authorities in future investment programmes and move away from competitive bidding between councils. Any allocation must use a transparent process, based on clear criteria, and be focused on achieving desired outcomes. (Recommendation, Paragraph 66)
Government Response Summary
The government described current funding allocations for the Household Support Fund, Discretionary Housing Payments, and the Local Authority Housing Fund, along with future considerations for Local Housing Allowance rates, without outlining a general transparent and outcomes-based process for future investment programmes to replace competitive bidding.
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18 Conclusion Deferred
As part of the Ministry’s reduction of the use of funding pots and competitive bidding, it must consider and reduce the number of funding pots managed across multiple government departments, not just those managed by the Ministry. (Recommendation, Paragraph 67)
Government Response Summary
The government responded by outlining plans to update the funding formulae in the Settlement and incorporate new deprivation data, including housing costs, into the Index of Multiple Deprivation, rather than addressing the reduction of funding pots across multiple government departments.
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19 Conclusion Deferred
Unfunded mandates (responsibilities for local authorities without adequate funding or compensation) contribute to the lack of sustainability in the local government sector. (Conclusion, Paragraph 74)
Government Response Summary
The government noted a recommendation to reform or replace council tax (not the provided conclusion) and stated that all tax policy remains under review, with decisions made by the Chancellor at fiscal events.
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20 Conclusion Rejected
The New Burdens doctrine, which requires government departments to ensure any new responsibilities for local authorities are fully costed and funded, is a vitally important part of government financing but is not robust enough to prevent unfunded mandates. (Conclusion, Paragraph 75)
Government Response Summary
The Government does not accept the recommendation to devolve full responsibility for setting council tax to individual councils at this time, citing existing local authority control over tax levels and discretionary powers.
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21 Conclusion Deferred
The New Burdens doctrine must be reviewed, updated, and put on a stronger statutory footing. It must focus not only on new responsibilities, but on any increase in the costs of mandatory services delivered by local authorities. For any such increase in cost, there must be a proportionate increase in …
Government Response Summary
The Government did not address the recommendation to review and strengthen the New Burdens doctrine, instead discussing national business rates multipliers, local relief powers, and generally keeping all tax policy under review.
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22 Conclusion Deferred
The increase in the rate of employer National Insurance Contributions has placed a significant financial burden on local authorities that has not been sufficiently covered by new funding. It is an unfunded mandate of the Government’s making. (Conclusion, Paragraph 81)
Government Response Summary
The Government did not address the conclusion regarding unfunded employer National Insurance Contributions, instead discussing the Business Rates Retention System reset in 2026, transitional arrangements, and future reset timings.
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24 Conclusion Deferred
The Ministry and HM Treasury must work together to align accountability over decisions that affect local government, including around national taxation. Authority over tax decisions that affect local government and responsibility for the financial sustainability of local government should be held together, perhaps by a single Minister who can work …
Government Response Summary
The Government did not address aligning accountability for local government finance across departments, instead discussing Section 114 notices, financial flexibilities for councils, and an upcoming consultation on support frameworks.
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25 Conclusion Deferred
We support and echo the conclusions of the recent report Adult Social Care Reform by the Health and Social Care committee. As they have said in the summary of their report, successive Governments have not fully considered the human and financial costs of inaction on social care reform, including costs …
Government Response Summary
The Government did not address the urgent need for social care reform, instead committing to improving assessment of central government funding distribution and setting out further detail on an updated support framework in the autumn.
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26 Conclusion Deferred
While we support the new independent commission into adult social care led by Baroness Casey, we are concerned that the proposed timescale means that urgent reforms to social care services will not be implemented soon enough to overcome the severity of the crisis in adult social care. If no action …
Government Response Summary
The Government did not address concerns about the timescale for social care reform, instead discussing the transparency and external assurance reviews for councils receiving Exceptional Financial Support (EFS).
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28 Conclusion Deferred
The Department for Health and Social Care must ensure that the ongoing reforms and cuts to Integrated Care Systems and Integrated Care Boards are aligned both with wider reorganisation of local government and with necessary reforms to the adult social care sector. (Recommendation, Paragraph 99)
Government Response Summary
The Government did not address aligning health and social care system reforms with local government reorganisation, instead detailing a local audit strategy, the establishment of the Local Audit Office, and a review of local authority accounts.
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29 Conclusion Deferred
The statutory override that allows local authorities to keep deficits of the Dedicated Schools Grant (DSG) off their books is an unsustainable measure that hides the true cost burden on local authorities. The recent extension of the override until 2028 is a necessary step to protect local authorities from the …
Government Response Summary
The Government did not address the sustainability of the Dedicated Schools Grant (DSG) deficit override, instead outlining a commitment to review the Code of Audit Practice by the end of 2027 and championing auditors' statutory reporting powers.
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31 Conclusion Accepted
Home-to-school transport is a particular area of concern for the affordability of local government services. We support the Government’s proposed update to the assessment of local authority’s needs relating to home-to-school transport, but while this more fairly distributes money between local authorities, it does not make the service as a …
Government Response Summary
The government acknowledges the rising costs of home-to-school transport are linked to the SEND system and commits to improving inclusivity in mainstream schools through significant new SEND funding, a forthcoming White Paper, and £740 million in high needs capital.
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33 Conclusion Acknowledged
It is a source of national shame that cases of homelessness, particularly among families and children, are at record levels and continue to rise. This is placing considerable strain on the finances of local authorities. We repeat the findings of our report of earlier this year, England’s Homeless Children: The …
Government Response Summary
The government acknowledges the concern about rising homelessness and outlines specific actions, including allocating £1 billion for the Household Support Fund and Discretionary Housing Payments and £950 million for the Local Authority Housing Fund to increase temporary accommodation supply.
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35 Conclusion Acknowledged
We support the return to multi-year funding settlements, but the local government funding reforms announced to date will not solve the underlying problems in the system by themselves. (Conclusion, Paragraph 127)
Government Response Summary
The government acknowledges the need for local government funding reform, confirming its commitment to multi-year allocations through the 2026-27 LGFS and simplifying the funding landscape via the Fair Funding Review 2.0.
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36 Conclusion Accepted
We acknowledge the trade-offs that the Government is making in updating the local government funding formula, and we support the Government’s decision to focus funding towards areas with higher need, which will help correct an existing imbalance in the system. We are pleased to see that factors considered in the …
Government Response Summary
The government is committed to targeting funding effectively at areas with the greatest need through the Fair Funding Review 2.0, utilizing updated needs assessments that account for deprivation at local authority and sub-ward levels for social care.
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38 Conclusion Rejected
Council tax is a regressive and unfair tax. We note the Government’s decision to prioritise other areas of local government funding for reform, but any local government reform that does not address council tax will be undermined by the current system. Council tax reform should be a higher priority on …
Government Response Summary
The government notes the recommendation for council tax reform but states it currently has no plans to reform it, although it is focusing on the approach to accounting for council tax income in funding proposals.
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39 Conclusion Not Addressed
Using property values from 1991, or proxy 1991 values where actual values are not available, is inappropriate and becoming increasingly inappropriate as time goes on. (Conclusion, Paragraph 155)
Government Response Summary
The government notes the broader recommendation to reform council tax but states it has no plans for such reform, though it is focusing on how council tax income is accounted for in funding proposals, without addressing the inappropriateness of using 1991 property values.
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40 Conclusion Rejected
The Government’s arguments that council tax has high collection rates and leads to stable income levels are not sufficient reasons to avoid reforming council tax. (Conclusion, Paragraph 156)
Government Response Summary
The government notes the recommendation to reform council tax but states it currently has no plans to do so, though it is focusing on how council tax income is accounted for in funding allocations.
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41 Conclusion Rejected
Council tax is one of the main interactions with local government that residents will have. Giving councils more power over, and therefore more responsibility for, setting council tax will improve democratic engagement by residents. (Conclusion, Paragraph 157)
Government Response Summary
The government explicitly rejects the implied recommendation to devolve full responsibility for setting council tax to individual councils, stating that council tax is already localized with authorities having powers over setting levels and administering the tax.
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44 Conclusion Acknowledged
We acknowledge the Government’s current plans to reform business rates and the Business Rates Retention system, including the business rates reset and the addition of new multipliers. However, we remain concerned that the business rates system can harm growth, disincentivise investment, and entrench deprivation at local authority level. (Conclusion, Paragraph …
Government Response Summary
The government reiterates its commitment to transforming the business rates system to create a fairer system that supports investment, and acknowledges the importance of business rates in local government funding.
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49 Conclusion Not Addressed
The process of issuing and responding to a section 114 notice is not a productive solution to financial unsustainability caused by long-term underfunding and increasing responsibilities. The need to avoid a section 114 notice can itself lead to poor financial management. (Conclusion, Paragraph 191)
Government Response Summary
The government states s114 notices are part of a wider system but acknowledges that financial flexibilities can help manage pressures, having invited views on such flexibilities and promising further detail in the autumn, without directly addressing the committee's criticism of the s114 process itself.
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51 Conclusion Acknowledged
Exceptional Financial Support (EFS) by means of capitalisation direction is a stopgap measure that avoids section 114 notices and allows councils to produce short-term balanced budgets, but can weaken councils’ finances and capital investment in the long term. Capitalisation directions have been over-used for many years, and Exceptional Financial Support …
Government Response Summary
The government states it is committed to fair funding distribution and has consulted on transitional arrangements and financial flexibilities for local authorities, with further details on an updated support framework to be set out in the autumn.
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53 Conclusion Rejected
The process by which the Government chooses which councils will receive EFS, and what it will look like, is not transparent. (Conclusion, Paragraph 204)
Government Response Summary
The government rejects the committee's conclusion that the process for EFS is not transparent, stating it has always maintained transparency with external assurance reviews and support requests published on GOV.UK.
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56 Conclusion Accepted
We support the Government’s moves to clear the local audit backlog and get the local audit system functioning, including the creation of the Local Audit Office and amendments to the Code of Accounting Practice, noting that these are in line with recommendations made by the predecessor Committee in its report …
Government Response Summary
The government has laid statutory instruments to ensure proportionate audit regimes for smaller and major local audits and committed to review the content and format of local authority accounts in April 2025 to address the committee's concerns about audit requirements.
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