Source · Select Committees · Public Accounts Committee
Recommendation 5
5
The Department’s over-optimism about the impact of the pandemic on local authorities risks leading to...
Conclusion
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.
Government Response
Acknowledged
HM Government
Acknowledged
5.1 The government agrees with the Committee’s recommendation. Target implementation date: October 2021 5.2 The department believes it has made a realistic assessment of the impact of the pandemic on local authorities and the resultant risk of service reductions. 5.3 The department responded rapidly in March 2020 in providing un-ringfenced funding to support local authorities with the pressures they faced and has provided over £6 billion in un-ringfenced funding since the start of the pandemic in total. The department also rapidly established its Local authority COVID-19 financial impact monthly monitoring data collection process to ensure government was able to effectively monitor pressures on the sector and respond accordingly. The latest data from this monthly monitoring (May 2021) suggests that pressures have been met for the sector. 5.4 Resources made available through the 2020 Spending Review and annual settlement allowed councils in England access to an overall increase in Core Spending Power from £49 billion in 2020-21 to up to £51.3 billion in 2021-22, a 4.6% increase in cash terms. This is in line with the available increase from 2019-20 to 2020-21. This recognises the resources councils need to meet their spending pressures and maintain current service levels. The Exceptional Financial Support process is available if needed. Every local authority has now set a budget for 2021-22. 5.5 The department has also continued to engage with other government departments throughout the pandemic on service specific pressures and additional asks placed on local authorities as part of their vital role in the pandemic response to ensure that the sector was both engaged on the policy design and fully funded for the asks placed on them. As MHCLG prepares for the 2021 Spending Review, it has engaged with departments to understand the long-term impacts of COVID-19, this includes analytical working groups to develop robust and well evidenced projections. 5.6 The department will continue its key role in ensuring local authorities are supported in their role through the pandemic and will report back on this in October 2021 to the Committee.