Recommendation 6

The Department has yet to address the longstanding structural issues within local government finance. Since 2015–16, the government has been planning to put in place significant changes to local government finance, but these have yet to be introduced. Parts of the current finance system are broken or flawed. The pandemic has also cast doubt on planned financial reforms which were centred on greater local retention of business rates. For instance, local authorities expect to collect £1.6 billion less in business rates for 2020–21 than planned. Reforms to local government finance need to be co-ordinated with long-awaited reforms to adult social care, with 8 COVID-19: Local government finance social care proposals now promised in 2021. The Department recognises that there are a range of significant issues that should not be dealt with separately. It will be crucial to put in place meaningful and well thought-through reforms that reflect the lasting changes flowing from the pandemic and ensure that there is a period of financial stability in the interim while new reforms are being devised. Recommendation: The Department should write to us by October 2021 setting out its plans to ensure that: • local government finance is reconsidered from first principles, reformed in a measured fashion working with the sector, and ultimately new arrangements put in place that are fit for purpose and built to last; and • a stable funding environment, ideally based on a multi-year settlement, is established as a bridging mechanism while more fundamental long-term reforms are designed.