Source · Select Committees · Public Accounts Committee
Recommendation 4
4
The Department is making some welcome improvements to its oversight of the sector although it...
Conclusion
The Department is making some welcome improvements to its oversight of the sector although it remains to be seen what concrete difference these changes will make. Over time the Department has improved its analysis of financial Local Government Finance System: Overview and Challenges 7 risk and its engagement with local authorities: the sector praised Departmental engagement during the pandemic highly. However, while we do not expect the Department to micro-manage local authorities, there is clearly more it can do as part of its stewardship role. The Department recognises the gaps and plans to collect more detailed information on local authority reserves from the next financial year. It will also start collecting data on local authority holdings of commercial property, companies, and financial investments regularly. These changes, which we recommended in 2016, are welcome but we will only be fully reassured when we see the Department taking decisive and effective action where this new data reveals pressing risks. Recommendation: Alongside its Treasury Minute response to this report, the Department should write with more detail about its new data collections and how it plans to use these data, including those relating to borrowing and investment.
Government Response
Not Addressed
HM Government
Not Addressed
4.1 The government agrees with the Committee’s recommendation. Recommendation implemented 4.2 In addition to the approach outlined under recommendation one, the department is strengthening its data collections on local authority risk and reserves to improve its oversight of local government. 4.3 Further work is ongoing to improve data collection on risk. This brings together data with intelligence from ongoing engagement with the sector and other government departments to provide an overall understanding of the risks affecting the sector and individual authorities. This includes their financial viability, service delivery and performance, leadership or corporate governance and now includes capital risk. The department looks at risk levels to identify local authorities which may need support. This could then be addressed by sector led peer support from the Local Government Association (LGA) or in some circumstances through exceptional financial support. 4.4 The government recognises the value of information on local authority reserves. That’s why the department is collecting more detailed information from local authorities on the different types and purposes of earmarked reserves that they hold, as part of the Local Authority Revenue Expenditure and Financing collections from 2022-23 onwards. This data will improve the understanding of local authority reserves within government, facilitating evidence-informed decision-making, for instance on the right level of resources to be made available to local government. 4.5 The department wrote to the Committee in April alongside this Treasury Minute with more detail about its new data collections and how it plans to use these data.