Source · Select Committees · Public Accounts Committee
Recommendation 2
2
Too often the Department has failed to act with sufficient urgency to address risks to...
Recommendation
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
Government Response
Accepted
HM Government
Accepted
2025. This should be broken down by how much coverage is being achieved by: • individual commercial suppliers, such as Openreach, Virgin Media O2 and smaller suppliers know as alternative networks or “alt-nets” etc., and the extent to which it is through full fibre technology; and • the gigabit voucher scheme. 2.1 The government agrees with the Committee’s recommendation. Target implementation date: July 2022 2.2 The UK has one of the fastest builds in Europe, becoming a leader in terms of gigabit connectivity by 2025. The department has achieved this by setting clear, ambitious targets to galvanise operators and investors, together with a regulatory environment that stimulates competition and investment in the market. 2.3 There are now over 80 different companies rolling out gigabit broadband. The UK is on track to achieve coverage to 85% of the UK’s 31 million premises by 2025. 2.4 As of March 2022, gigabit capable networks are available to 66% of UK premises, including full fibre networks to 32% of UK premises, according to ThinkBroadband.com, up from just 6% at the beginning of 2019. • Virgin Media O2 has upgraded and extended its network, offering gigabit speeds to over 50% of the UK. Industry sources suggest at least 10% of these are served by full fibre. The company has announced an upgrade path to convert the remainder to full fibre, and is seeking joint venture partners to extend to a further 7 million premises; • Openreach - and KCom in Kingston upon Hull - have built new full fibre networks to 21% of UK premises; and • a further 11% of UK premises are able to receive gigabit services over an alternative network provider’s full fibre networks. 2.5 BDUK delivered gigabit coverage to over 600,000 premises by April 2021. BDUK has pivoted the Superfast programme, which now targets the remaining 3% of UK premises without superfast speeds, to focus on gigabit capable networks. 2.6 BDUK will report further details on the coverage achieved by its different interventions in its performance report in July 2022, and then in the annual report and accounts from 2023. 2.7 The department will address this recommendation in its letter to the Committee.