Recommendations & Conclusions
4 items
2
Recommendation
Thirty-Fourth Report - Local Government…
Not Addressed
Too often the Department has failed to act with sufficient urgency to address risks to financial sustainability in the sector, leading to problems becoming entrenched. This Committee warned in 2016 that the local capital finance framework might not be able to cope with changes in local authority activity, particularly in …
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Too often the Department has failed to act with sufficient urgency to address risks to financial sustainability in the sector, leading to problems becoming entrenched. This Committee warned in 2016 that the local capital finance framework might not be able to cope with changes in local authority activity, particularly in relation to investment in commercial property. The Department reacted by changing the guidance on local authority investments and on setting aside money to repay debts, but these proved ineffective in addressing key risks. Disappointingly, it took until 2020 before the Treasury took action to restrict borrowing for commercial investment, allowing billions of pounds to be borrowed and spent in the intervening period. In November 2021, the Department started consulting on legislative change to ensure all authorities act prudently and ensure they have the money to repay debts in future. The Department’s consultation was in response to local authority practices which were not fully compliant with the duty to make prudent revenue provision for borrowing. For example, some local authorities excluded a proportion of their debt when calculating their Minimum Revenue Provision (MRP); and some local authorities had used capital receipts instead of revenue resources for MRP. Meanwhile some local authorities have set aside much too little money, and they 6 Local Government Finance System: Overview and Challenges now cannot make up the difference promptly without threatening their financial position. In addition, current proposals to continue to use just guidance to encourage local authority audit committees to have an independent member, rather than make it compulsory, suggest the Department is still over-optimistic about the ability of such ‘soft’ changes to address risks. Recommendation: In its response to this report: • The Department needs to identify key areas of concern regarding the sustainability of local government finance and explain how these will be
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Government response AI summary
The government discusses broadband coverage and targets, which is not relevant to the recommendation about local government finance sustainability.
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HM Treasury
6
Recommendation
Thirty-Fourth Report - Local Government…
Not Addressed
The sector is still facing uncertainty and stop-gap financial arrangements until such time as the longer-term reforms are put in place. The sector is once again faced with a single-year settlement for the 2022–23 finance year. It has now had three one-year settlements, preceded by a four year settlement full …
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The sector is still facing uncertainty and stop-gap financial arrangements until such time as the longer-term reforms are put in place. The sector is once again faced with a single-year settlement for the 2022–23 finance year. It has now had three one-year settlements, preceded by a four year settlement full of short-term funding initiatives. The government has proposed six major updates or reforms that could significantly alter the business rates retained by local authorities, business rates themselves, the way funding is distributed and the cost of providing adult social care - the service local authorities spend most on. While the spending review provided a final decision and a clear timescale for business rates revaluation, the remaining reforms are subject to further consideration by Ministers in the Department, the Treasury or the Department of Health and Social Care and will require public consultation. We understand that some support for adult social care will start to flow from April 2022, but it seems clear to us no other changes will be delivered before April 2023 at the very earliest. This prolongs the damaging uncertainty for local government. Although the government needs to take time to 8 Local Government Finance System: Overview and Challenges get the reforms right and ensure alignment with the levelling up agenda and other Ministerial priorities, we have previously recommended that a multi-year settlement be established, nonetheless. This would provide a stable funding environment and act as a bridging mechanism while the Department works on long-term reforms. Unfortunately the Department has again missed this opportunity and will also continue to be hindered by severely outdated funding formulae and its lack of information on services. Recommendation: Alongside its Treasury Minute response to this report, the Department should write to us setting out its plans to support the sector through this interim period.
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Government response AI summary
The government discusses broadband coverage and plans for market surveys and contract signings, which is not relevant to the recommendation about supporting the local government sector through an interim period.
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HM Treasury
7
Recommendation
Thirty-Fourth Report - Local Government…
Not Addressed
It is still not clear how the government will take a strategic, cross-government approach to rationalising local authority funding, which is particularly important for cross-cutting priorities like net zero and levelling up. Responding to concerns about the burden of bidding for multiple funding pots, the recently-appointed Secretary of State for …
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It is still not clear how the government will take a strategic, cross-government approach to rationalising local authority funding, which is particularly important for cross-cutting priorities like net zero and levelling up. Responding to concerns about the burden of bidding for multiple funding pots, the recently-appointed Secretary of State for local government has recognised the need to simplify and rationalise the funding available to local authorities. This is welcome recognition that the current situation does not represent value for money. Sector analysis has previously highlighted the numerous grants available to local authorities in any one year. During 2020–21, twenty-two grant funds were available for net zero work alone, many of which local authorities had to compete with each other for. While competing for funding can allow funding to be prioritised for those areas where it can be most effective, it also has the potential to create winners and losers with local people missing out. The Department is considering whether to review its approach to rationalising grants within the levelling up funds for which it is directly responsible. However, we have highlighted the need for better cross-government coordination many times before and we lack confidence that central government will join up to ensure local government funding decisions take account of the overall role of, and burdens on, local government. Recommendation: In its response to this report, the Department and the Treasury should set out what changes will be required to deliver a strategic, cross- government approach to rationalising funding for local government, especially for major strategic priorities. Local Government Finance System: Overview and Challenges 9 1 Risks to the sector
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Government response AI summary
The government's response is a preamble and introduction to the overall document, and doesn't address the recommendation about rationalising local authority funding.
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HM Treasury
21
Conclusion
Thirty-Fourth Report - Local Government…
We have previously been critical of the Department for Education’s understanding of costs within children’s social care services, and we have not yet been reassured that funding for local authorities to support unaccompanied asylum-seeking children, and care leavers who were formerly unaccompanied asylum-seeking children, is sufficient.84 When pressed, the Department …
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We have previously been critical of the Department for Education’s understanding of costs within children’s social care services, and we have not yet been reassured that funding for local authorities to support unaccompanied asylum-seeking children, and care leavers who were formerly unaccompanied asylum-seeking children, is sufficient.84 When pressed, the Department directed us towards the Home Office as the lead department.85 Continued funding uncertainty
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HM Treasury