Recommendation 5

The Department’s over-optimism about the impact of the pandemic on local authorities risks leading to reductions in services for local people. The Department is confident about the sector’s stability and sustainability in relation to the immediate and short-term impacts of the pandemic. However, it recognises that there will be financial impacts on local authorities. Local government sector representatives are clear that most councils will not be able to manage solely using reserves and will also need to make service cuts in 2021–22. We were told about many councils facing multi-million pound budget reductions due to COVID-19, even after government support. Typical council tax bills will rise by an average of 4.3% across England in 2021–22, meaning that local people could be paying more for less. We have previously found that there is insufficient monitoring of the way that local government financial pressures affect services. Given this, we are not convinced by the Department’s confidence about the sustainability of services. Both the Department and local government representatives recognise that the pandemic will affect the sector’s finances in the short and medium term as they seek to understand the ‘new normal’ for local services. Recommendation: The Department, working with other government departments, should ensure that decision-making about actions to stabilise local government finance is informed by sufficient information about the service implications of current financial pressures. Recommendation: The Department and HM Treasury should ensure that their work for the next Spending Review includes full consideration of the longer-term effects of the pandemic on local government finance and the demands placed on local authorities.