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Government in denial over state of council finances

6 February 2019

Local authority finances continue to deteriorate amid rising demand for vital services. The Public Accounts Committee is dismayed by the Government's view of what it constitutes as sustainability in the sector. Short-term cash injections are not good value and Government must instead plan for the future.

Local authorities face enormous pressure: their financial position is continuing to deteriorate as demand for vital services increases.

Over the last eight years, the Government has cut the funding it gives to English local authorities by nearly half, while, at the same time, demand for critical council services has risen: housing is under strain with over a third more people homeless and adult and children social care are confronted with growing demand. The rate of looked-after children, for example, is at a 25-year high. The cost of adult and children's social care has forced many local authorities to reduce spending on services in other areas.

'An extremely worrying position'

Some councils are now in an extremely worrying position: overspending their budgets for social care, reducing key services, falling back on financial reserves and increasingly relying on generating other sources of income, which comes with greater risks.

The Ministry of Housing, Communities and Local Government (the Department) is relying on a short-term approach to a long-term problem. Overall spending by local authorities on services fell by 19.2% in real terms between 2010-11 and 2016-17.

'No sign Department can secure financial sustainability of local authorities'

The Government has had to inject large amounts of additional funding to ensure that the local authority sector can keep going in the short-term: £1.4 billion in the 2018 budget. Yet disturbingly, there is still no sign that the Department has a clear plan to secure the financial sustainability of local authorities in the long-term.

The Department continues to insist that the sector is sustainable but refuses to provide the evidence that Parliament and the public need to be assured that this is actually the case.

The Department has rejected a number of the Committee's previous recommendations on these subjects. We are deeply frustrated to have to repeat the same concerns about the sustainability of the sector and the ability of local authorities to provide the vital services that taxpayers need.

Chair's comment

Comment from Public Accounts Committee Chair Meg Hillier MP

“The Government is in denial about the perilous state of local finances. It insists the sector is sustainable yet is unwilling or unable to back up this claim.

Flimsy assertions have no place in financial planning. The fact Government has bailed out councils with short-term fixes should be evidence enough that all is far from well.

Government needs to get real, listen fully to the concerns of local government and take a hard look at the real impact funding reductions have on local services. And then it needs to plan properly for the long-term.

It is extremely troubling that the Government views the financial sustainability of councils solely in terms of statutory services, rather than full range of services local people need and can reasonably expect councils to provide.

Cutting youth services, for example, may simply build pressures on statutory services and we expect Government to explain how it takes account of these shunted costs in reaching its conclusions.

It must also explain why its conclusions differ from those of the Local Government Association, local authorities and other representative bodies seriously concerned about sustainability in the sector.”

Further information

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