Recommendations & Conclusions
30 items
2
Conclusion
31st Report - Local Government Financia…
Accepted
Local authorities’ ability to improve outcomes for people is undermined by an overly complex funding system, with competing policy demands and funding streams. Local authorities receive funding through the annual local government finance settlement, which includes formula-based grants and locally retained business rates. They can also raise income locally through …
Government response. The government agreed and outlined specific plans to simplify local authority funding through the Fair Funding Review 2.0 and Local Government Outcomes Framework, including consolidating grants into large ringfenced funds for key areas and rolling suitable grants into the Revenue …
HM Treasury
3
Conclusion
31st Report - Local Government Financia…
Accepted
Significant financial pressures are constraining local authorities’ ability to invest in prevention, leading to less early intervention services which could help manage demand. Preventative services can be used to manage demand by helping to stop, delay or reduce the extent of need for statutory services and can help deliver better …
Government response. The government agreed, stating the recommendation was implemented via an HM Treasury letter, and outlined specific investments from Spending Review 2025 to support prevention, including over £500 million for children's social care, £842 million annually for a new Crisis and …
HM Treasury
4
Conclusion
31st Report - Local Government Financia…
Accepted
Neither MHCLG nor HM Treasury have assessed the impact that increases in national insurance contributions (NICs) will have on local government services. In April 2025, the NIC employer rate increased from 13.8% to 15% whilst the threshold at which employers start paying NICs on employee earnings reduced from £9,100 to …
Government response. The government agreed to carry out a post-implementation review of the increase in National Insurance Contributions, focusing on impacts on third-party providers, care markets, and local government services, and will continue monitoring pressures through ongoing stakeholder engagement.
HM Treasury
5
Conclusion
31st Report - Local Government Financia…
Accepted
Financial pressures have led to short-term and unsustainable approaches to managing overspends in local government. In 2020–21, MHCLG introduced the Exceptional Financial Support (EFS) framework to help local authorities that are in financial trouble. Since then, 42 local authorities have received over £5 billion of support through EFS. While EFS …
Government response. The government agreed and committed to setting out a solution for local authority financial sustainability, including a White Paper on SEND reform in Autumn 2025, a phased transition to a new SEND system, and an extension of the Dedicated Schools …
HM Treasury
1
Conclusion
31st Report - Local Government Financia…
Accepted
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Ministry of Housing, Communities and Local Government (MHCLG) and HM Treasury on local government financial sustainability.1 We also heard evidence from Professor Tony Travers, Professor in Practice and Associate Dean of the School …
Government response. The government stated that MHCLG already ensures value for money through its Local Government Accountability Framework, collects extensive financial data and intelligence, and is implementing reforms like the new Local Government Outcomes Framework from April 2026 to simplify funding and …
HM Treasury
7
Conclusion
31st Report - Local Government Financia…
Accepted
Local audit, including reports on value for money arrangements within local authorities, helps to provide transparency and assurance to both central government and taxpayers on local authorities’ plans to achieve effective services. At 31 March 2024 only 25% of local government bodies had up- to-date external audit assurance on their …
Government response. The government states the recommendation is implemented, outlining its Local Government Accountability Framework and ongoing reforms to oversight. It highlights the recently announced Local Government Outcomes Framework, to be published with the 2026-27 Local Government Finance Settlement and active from …
HM Treasury
8
Conclusion
31st Report - Local Government Financia…
Accepted
Despite increased spending , there are indications that services are not meeting peoples’ needs, such as only 50% of Education, Health and Care (EHC) plans for children and young people being issued within the 20-week statutory limit in 2023.15 MHCLG acknowledged that although spend on SEND services had increased, parent …
Government response. The government agrees to address service shortfalls by end of 2025, committing over £2 billion for children's social care reform, a White Paper for SEND system reform in Autumn 2025, and continued £1 billion investment in homelessness services with a …
HM Treasury
9
Conclusion
31st Report - Local Government Financia…
Accepted
Councillor Pete Marland and Iain Murray both stressed the importance of focussing on outcomes.18 In response to our question on supporting greater transparency of spend and delivery of outcomes, MHCLG told us that there was significant work under way to produce a simple and 10 Q 41 11 C&AG’s Report, …
Government response. The government states the recommendation is implemented and provides details on the new Local Government Outcomes Framework, announced on 3 July 2025. This framework will be published alongside the 2026-27 Local Government Finance Settlement and will be used from April …
HM Treasury
10
Conclusion
31st Report - Local Government Financia…
Accepted
The funding system for local government is extremely complex. The local government finance settlement provides formula-based funding to local authorities, which MHCLG distributes through a combination of formula- based grants, general grants and locally retained business rates. Local authorities also fund services through locally raised income, such as council tax …
Government response. The government agrees to simplify local government funding by publishing the Fair Funding Review 2.0 consultation, establishing a Local Government Outcomes Framework, and consolidating various grants into larger, more flexible forms, with a target implementation by the end of 2025.
HM Treasury
11
Conclusion
31st Report - Local Government Financia…
Accepted
In recent years, government has provided single-year finance settlements, with stakeholders consistently calling for multi-year settlements to aid longer term planning and decision making. Written evidence from Cornwall Council highlighted how single year settlements compound the financial challenges it faces and makes longer-term financial planning almost impossible.23 Government has now …
Government response. The government agrees to implement multi-year funding settlements by the end of 2025, detailing actions such as the Fair Funding Review 2.0 consultation, introducing the Local Government Outcomes Framework, and consolidating various grants into the Revenue Support Grant.
HM Treasury
12
Conclusion
31st Report - Local Government Financia…
Accepted
Outside of the finance settlement, local authorities can receive hundreds of different local grants from several government departments. While there is no official count, Councillor Pete Marland suggested that there are around 300 funding streams coming from central government to support specific services or policy objectives.25 These are often small, …
Government response. The government agrees to simplify local authority funding and reduce the number of grants by the end of 2025, citing the Fair Funding Review 2.0 consultation, plans to roll suitable grants into the Revenue Support Grant, and consolidate adult social …
HM Treasury
13
Conclusion
31st Report - Local Government Financia…
Accepted
Many departments rely on local authorities to deliver policy initiatives, although lack of joined-up working has resulted in competing funding demands. Our predecessors warned that competition between the Home Office and local authorities for local accommodation was “driving up prices and exacerbating the homelessness challenges that local authorities already face”.31 …
Government response. The government agrees to improve joined-up working by the end of 2025, explaining how the Fair Funding Review 2.0 consultation and the Local Government Outcomes Framework (active from April 2026) will facilitate better cross-government collaboration and local delivery, alongside continued …
HM Treasury
14
Conclusion
31st Report - Local Government Financia…
Accepted
MHCLG recognises the importance of investing in prevention but also the challenge of funding it when finances are constrained.34 Preventative services help stop, delay or reduce the need for statutory services and can help to deliver better outcomes.35 Over the period 2015–16 to 2023–24, local authorities have spent more on …
Government response. The government affirms its commitment to prevention-focused public sector reform, stating the recommendation is implemented and detailing significant investments already made or committed through the 2025 Spending Review, including over £500 million for children's social care, £842 million annually for …
HM Treasury
15
Recommendation
31st Report - Local Government Financia…
Accepted
HM Treasury told us how the shift to prevention takes time and needed to be done gradually.39 We challenged HM Treasury and MHCLG on how the spending review and local government finance settlement would support this shift and incentivise prevention.40 HM Treasury told us that spend was not the only …
Government response. The government states the recommendation is already implemented, detailing existing commitments from the 2025 Spending Review, including investments in children’s social care, the Crisis and Resilience Fund, homelessness, and community help partnerships to support a shift towards prevention.
HM Treasury
16
Conclusion
31st Report - Local Government Financia…
Accepted
MHCLG said it had already begun to focus funding on prevention in a number of ways, including the introduction of a new £270 million grant for children’s social care prevention. It had also increased the overall homelessness prevention grant for 2025–26 and specified that 49% must be spent on prevention, …
Government response. The government confirms its commitment to prevention-focused public sector reform, stating the recommendation is implemented and detailing significant investments already made or committed through the 2025 Spending Review in children's social care, crisis support, homelessness, and community partnerships.
HM Treasury
17
Conclusion
31st Report - Local Government Financia…
Accepted
In April 2025 the NIC employer rate increased from 13.8% to 15%, while the threshold at which employers start paying NIC on employees’ earnings reduced from £9,100 to £5,000. HM Treasury told us the aim was to raise more tax to fund the increase in public spending announced in the …
Government response. The government commits to conducting a post-implementation review by Autumn 2025 to monitor the impacts of employer NICs changes on local government, addressing the context of the committee's factual statement on NIC increases and government allocations.
HM Treasury
18
Conclusion
31st Report - Local Government Financia…
Accepted
HM Treasury told us that it calculated the level of compensation for public authorities by apportioning the expected increase in direct NICs between the different work forces within the public sector. We were told that this did not account for any increase in charges passed on to the public sector, …
Government response. The government commits to conducting a post-implementation review by Autumn 2025 to monitor the impacts of employer NICs changes on local government, thereby implicitly addressing the committee's observations on calculation methods and unaccounted costs.
HM Treasury
19
Conclusion
31st Report - Local Government Financia…
Accepted
MHCLG told us that it consulted with the sector on how best to allocate the £515 million so that it did not discriminate against local authorities that had chosen to outsource or insource specific services. It went on to say that it revised its approach based on sector-feedback.49 MHCLG recognised …
Government response. The government commits to conducting a post-implementation review by Autumn 2025 to monitor employer NICs changes and their impacts, which implicitly addresses the committee's observations about varied local authority funding approaches for NICs.
HM Treasury
20
Recommendation
31st Report - Local Government Financia…
Accepted
Written evidence we received from Mencap, a social care provider supporting over 4,000 people with learning difficulties, indicated that the changes to employer NICs coupled with increases in the National Living Wage, could potentially cost it an additional £18 million a year. Mencap stated that if local authorities did not …
Government response. The government has allocated £4.7 billion to the public sector and £515 million specifically for local government to manage employer NICs changes, and agrees to conduct a post-implementation review of the NICs increase by Autumn 2025.
HM Treasury
21
Recommendation
31st Report - Local Government Financia…
Accepted
We asked whether an impact assessment had been carried out to consider whether local authorities would be able to fully compensate organisations, particularly smaller charities providing local government services, for the increased NIC costs out of the £515 million.53 MHCLG told us that at every spending review it looks “in …
Government response. The government accepts the implied recommendation to assess the impact of NIC changes on local government services, committing to a post-implementation review by Autumn 2025. They also disagree with the committee's finding that no prior assessment was made.
HM Treasury
22
Recommendation
31st Report - Local Government Financia…
Accepted
We drew MHCLG’s attention to the Local Government Association’s calculations on the costs to local government of the increases in NICs. These suggest that the direct cost to local government is an estimated £637 million. The LGA also calculated indirect costs of £1.1 billion to private sector organisations who provide …
Government response. The government accepts the implied recommendation to assess the impact of NIC changes, committing to a post-implementation review by Autumn 2025 to monitor pressures on local government, while also disagreeing with the committee's finding of no prior assessment of LGA …
HM Treasury
23
Recommendation
31st Report - Local Government Financia…
Accepted
Central government has introduced measures to help local authorities manage budget overspends. In 2020–21, MHCLG introduced the Exceptional Financial Support (EFS) framework to help local authorities that are in financial trouble.57 Since then, 42 local authorities have received over £5 billion of support through EFS.58 Thirty local authorities received support …
Government response. The government accepts the recommendation to address local authorities' budget overspends, committing to fund and reform the SEND system, publish a White Paper by Autumn 2025, and extend the Dedicated Schools Grant Statutory Override until 2027-28.
HM Treasury
24
Conclusion
31st Report - Local Government Financia…
Accepted
Written evidence we received highlighted that EFS was no longer considered exceptional and there were concerns that some local authorities required measures ‘over and above’ the EFS framework, given the scale of their financial distress.64 MHCLG told us it recognised that whilst EFS provided support in the short term, it …
Government response. The government agrees to address local authority funding pressures, committing to reform the SEND system with a White Paper in Autumn 2025 and a phased transition, alongside extending the Dedicated Schools Grant Statutory Override until 2027-28.
HM Treasury
25
Recommendation
31st Report - Local Government Financia…
Accepted
Many local authorities have seen rises in Special Educational Needs (SEND) demand, and the NAO has previously reported that 101 local authorities overspent their SEND-related budgets in 2022–23.67 Department for Education (DfE) estimates suggest that by the end of 2027–28, overspending on SEND-related budgets could be between £2.9 billion and …
Government response. The government agrees, committing to a phased transition to a new SEND system, extending the statutory override until the end of 2027-28, and promising a White Paper by Autumn 2025 with further details on managing deficits.
HM Treasury
26
Conclusion
31st Report - Local Government Financia…
Accepted
Iain Murray from CIPFA warned that even if these deficits were written off, local authorities would immediately start to accumulate new deficits due to high levels of demand in SEND.71 MHCLG told us that there was huge amounts of work currently going on in central government on special educational needs …
Government response. The government agrees, outlining a phased transition to a new SEND system with a White Paper by Autumn 2025 and an extension of the Dedicated Schools Grant Statutory Override to 2027-28 to help local authorities manage deficits.
HM Treasury
27
Recommendation
31st Report - Local Government Financia…
Accepted
Central government acknowledges the local government finance system is complex and outdated, with long-standing plans for reform not having taken place.75 In autumn 2024 government committed to reforms over the medium term. Alongside confirming the reintroduction of multi-year funding settlements from 2026–27 and funding simplification, it launched consultations on local …
Government response. The government accepts the recommendation to reform the local government finance system, detailing ongoing and planned initiatives like the Fair Funding Review 2.0 consultation, multi-year settlements, and specific strategies for key service areas by the end of 2025.
HM Treasury
28
Conclusion
31st Report - Local Government Financia…
Accepted
We asked MHCLG how its reforms will help councils deal with the immense financial challenges they face. It told us it recognised the problems and, through funding reform, it was seeking to align the way funding is distributed much more closely with changes in demographics, levels of 69 Committee of …
Government response. The government agrees, outlining its Fair Funding Review 2.0 consultation to simplify local authority funding, consolidate grants, and confirm new funding for children's social care, adult social care, SEND, and homelessness, with further details expected by the end of 2025.
HM Treasury
29
Recommendation
31st Report - Local Government Financia…
Accepted
We challenged MHCLG as to whether its reforms will put local government finance on a sustainable footing. It acknowledged that there was not enough money in the system, so the aim of the reforms was to use the money available more efficiently and productively. But MHCLG also recognised the need …
Government response. The government accepts the recommendation, outlining plans by end of 2025 as part of the multi-year Local Government Finance Settlement, including the Fair Funding Review 2.0, funding simplification, and reforms for children's social care, adult social care, SEND, and homelessness.
HM Treasury
30
Recommendation
31st Report - Local Government Financia…
Accepted
Given the range of proposed reforms as well as local government reorganisation, we pressed MHCLG on the timing and sequencing. MHCLG responded that “it is all happening at once”.84 It accepted that funding reform plans may need to be adapted depending on the outcome of the Casey Commission, which is …
Government response. The government accepts the recommendation regarding the timing and sequencing of reforms, detailing ongoing initiatives like the Fair Funding Review 2.0 and multi-year settlements, alongside commitments to reform children's social care, adult social care, SEND, and homelessness by specified dates.
HM Treasury
31
Conclusion
31st Report - Local Government Financia…
Accepted
Written evidence we received from the Chartered Institute of Public Finance and Accountancy pointed out that funding reform and local government reorganisation were opportunities to improve sustainability in the sector, but that local government approached these extensive reforms from a very fragile position.88 While MHCLG recognised there would be upfront …
Government response. The government agrees to address the need for funding reform and sustainability, highlighting its Fair Funding Review 2.0 consultation, plans to simplify and consolidate local authority grants, and new spending commitments for key services including children's and adult social care, …
HM Treasury