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Chronic lack of accountability and transparency in local government finance will hamper pandemic recovery

2 February 2022

In a report published today the Public Accounts Committee warns on the “real risk” that “much-heralded extra funding” in the 2021 Spending Review will only “allow local government to stand still” - not address the significant service pressures and risks which have built up as their funding fell in real terms by over 50% in the decade from 2010/11.

Even factoring in other income sources, local government income was £8.4 billion less than in 2010-11 in real terms at the start of the pandemic. This led to major spending reductions on many services.  

But as funding has fallen demand for key services has risen - local authorities now spend as much as eight out of every ten pounds of core funding on social care services. Even then need is still unmet, and that inevitably squeezes other cultural, planning, and regulatory services people rely on.  

To offset the cuts local authorities have turned to their residents - increasing council tax and charges for services, and some have set up companies and purchased properties to provide income streams. But the Committee notes “such activities do not always go to plan” – even before the economic hit of the pandemic – “and in some cases have led directly to the failure of local authorities”. PAC has previously reported that Government was “blind to the extreme risks of commercial investment by cash-strapped councils”.  

Chair's comments

Dame Meg Hillier MP, Chair of the Committee, said:

“Four local authorities have effectively gone bust since 2018 and there are worrying signs that more are getting into a similar position - but DLUHC has been almost wilfully blind to the parlous state of local government finances.  

Now it is finally taking action to find out what is going on but it has dawdled and dragged its heels while Ministers reconsider or re-consult on long promised and overdue reform - all the while relying on a deteriorating system of shockingly late and patchy local audits, and declining local authority spending on governance.  

This offers little accountability for local service users who now face both tax hikes and service cuts; little clarity for local budget holders and planners desperately trying to deliver services and deliver on their statutory duties; and too little early warning where problems are growing.  Many parts of the economy and the population face a long slog out of the pandemic and every pound wasted and lost to this chronic lack of accountability and transparency makes it all that much harder.”

Further information

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