Source · Select Committees · Public Accounts Committee
Recommendation 6
6
Rejected
Set out detailed timetable of local government finance reforms, implementation plans, and transitional arrangements.
Recommendation
There is significant uncertainty around how the proposed local government finance reforms and reorganisation will be implemented. Long standing plans for funding and service reforms have been delayed several times. The government has now announced a huge reform agenda for local government, including an overhaul of local audit, local finance reform, service reform including for SEND and children’s social care, and extensive local government reorganisation. With these reforms happening simultaneously, there are significant risks. There are capacity constraints within local authorities which risks their ability to plan for and implement such wholesale changes at once. And with the Casey Commission not concluding on adult social care until 2028, plans may yet need to be adapted. Professor Tony Travers warned that given the delays in finance reform, updating how funding is distributed will now result in significant shifts of spending power between local authorities, but transitional arrangements are currently still unclear. It is uncertain whether the reforms will significantly improve local government’s financial position given MHCLG’s acknowledgement that there is not enough money to go around. RECOMMENDATION a. To allow local authorities to plan, MHCLG should set out a detailed timetable of its proposed reforms and implementation plans as part of the provisional settlement, including what transitional arrangements it will put in place. 7 b. MHCLG should include detail on what the timetable is for reducing the financial pressure on social care, special educational needs provision and temporary accommodation and an indicative proportion of remaining resources it expects Councils to have to manage commonly used discretionary services. c. MHCLG and HM Treasury should also review how the switch from government to council tax funding has affected the provision of local services. 8 1 Challenges to delivering local services Introduction
Government Response Summary
The government rejected the recommendation to review the impact of switching to council tax funding, arguing that council tax is a locally determined and flexible funding stream, and existing mechanisms like the Fair Funding Review 2.0 already address proposals for better accounting for tax generating ability.
Government Response
Rejected
HM Government
Rejected
The government disagrees with the Committee’s recommendation. Council tax levels are always decided by local authorities. It is true that over time councils have generated comparatively more of their income from council tax rather than grant. However, council tax is the only fully locally retained local tax (a point recognised by the Lyons Report, and others) and a settled and fully flexible funding stream. It is also important to acknowledge that when making their decisions on council tax levels, councils will make their own choice about the range and quality of services they wish to provide and balance this with the burden to be placed on taxpayers. Given the importance of council tax to local government funding, the government sets annual referendum principles through the Local Government Finance Settlement to protect taxpayers from excessive increases. The shift towards locally retained business rates over the past decade is another significant factor in the diversification of local government funding and greater control over locally generated resources. The government has an important role as an equaliser for local government income, directing funding towards places that are less able to meet their needs through locally raised income. The methodology underpinning the Local Government Finance Settlement since 2013-14 takes into account councils’ ability to generate income from their council tax base. The recently published Fair Funding Review 2.0 consultation sets out proposals to better account for tax generating ability and the resulting variation in tax levels across the country. This includes the treatment of discounts, exemptions, premiums, local council tax support and collection rates.