Source · Select Committees · Public Accounts Committee
Recommendation 16
16
As the UK Government has a devolved structure, local authorities have significant autonomy over their...
Conclusion
As the UK Government has a devolved structure, local authorities have significant autonomy over their spending and have powers to invest in commercial property. We have, over a number of years, raised concerns over the behaviour of local authorities with regards to commercial property investments, noting as far back as 2016 that the government appeared complacent to the risk that these investments posed to local authority finances.31 In our recent July report into Local authority investment in commercial property, we concluded that the Ministry of Housing, Communities and Local Government (MHCLG) had failed to ensure local authorities adhered to guidance, which led to many taking on excessive and risky debt. We also found that MHCLG did not have the data it needed to carry out its oversight responsibilities.32
Government Response
Acknowledged
HM Government
Acknowledged
4.1 The government agrees with the Committee’s recommendation. Target implementation date: Autumn 2021 4.2 The UK, unlike most other countries, has a long-established practice of setting its fiscal objectives by reference to the whole public sector. The medium term forecasts of fiscal activity by local authorities are included within the fiscal aggregates forecast by the OBR and reported in outturn by HM Treasury and the Office for National Statistics each month, and which are used to support management of the UK’s fiscal position. The Ministry of Housing, Communities and Local Government (MHCLG) has the responsibility to monitor fiscal risks and intervene where necessary. HM Treasury works closely with MHCLG to understand the financial issues within the sector and determine appropriate policy responses: for example, in the reforms to the terms of loans provided by the Public Works Loan Board. 4.3 The WGA 2019-20 performance report will include additional information showing how fiscal risks are monitored and managed in the local government sector and bring in wider information on finances in the sector into the performance report. In future years, WGA will also build on existing segmental reporting in the account to show more detailed breakdowns of local authority balance sheet and revenue and expenditure items in the performance report. HM Treasury will, in addition, work with MHCLG to support their implementation of the government’s response to the Redmond Review to ensure stability in the audit 18 market and timely, transparent reporting of financial data needed to manage fiscal risks in local government. MHCLG published this response in December 2020, setting out how the government would, in partnership with key organisations, take swift action to support the ongoing sustainability of the local audit market. This includes, subject to consultation, enabling audit firms, councils and Public Sector Audit Appointments Limited (PSAA) to agree fees that more closely match the actual costs of audit, and temporarily extending the deadline for the publication of auditor opinions on local authorities’ accounts. This is alongside an additional £15 million to affected local authorities in 2021-22 to help councils to both meet the growing cost pressures in the audit market and deliver Sir Tony Redmond’s recommendations.