Source · Select Committees · Public Accounts Committee
Recommendation 23
23
Accepted
Exceptional Financial Support for councils allows capital asset use for revenue, not new funding.
Recommendation
Central government has introduced measures to help local authorities manage budget overspends. In 2020–21, MHCLG introduced the Exceptional Financial Support (EFS) framework to help local authorities that are in financial trouble.57 Since then, 42 local authorities have received over £5 billion of support through EFS.58 Thirty local authorities received support in 2025–26 to help them balance their budgets.59 Councils need to either sell off capital assets or borrow to raise these funds.60 In most cases, MHCLG has provided support through allowing local authorities to use capital finances to fund day-to-day spend.61 Written evidence we received from CIPFA explained that this does not result in significant additional funding being provided to the Councils affected.62 Iain Murray from CIPFA told us that an increasing number of councils that are otherwise well run are finding themselves in financial difficulties.63
Government Response Summary
The government accepts the recommendation to address local authorities' budget overspends, committing to fund and reform the SEND system, publish a White Paper by Autumn 2025, and extend the Dedicated Schools Grant Statutory Override until 2027-28.
Government Response
Accepted
HM Government
Accepted
5.1 The government agrees with the Committee’s recommendation. Target implementation date: end of 2025 5.2 This government recognises the pressures local authorities are facing because of their Dedicated School Grant deficits. The Department for Education Spending Review settlement confirmed funding for reform of the current Special Education Needs and Disabilities (SEND) system, details of which will be set out in a White Paper in Autumn 2025. 5.3 The government will commence a phased transition process to a new SEND system which will include working with local authorities to manage their system, including deficits, alongside an extension to the Dedicated Schools Grant Statutory Override, previously due to end in March 2026, until the end of 2027-28. The government will set out more detail at the provisional Local Government Finance Settlement on the plan for supporting local authorities with both historic and accruing deficits.