Financial distress in local authorities

Housing, Communities and Local Government Committee Closed Inquiry
Opened: 2 Nov 2023 Closed: 19 Mar 2024 Parliament page
Since 2018 eight English local authorities have issued section 114 notices. The results can be significant for local service delivery and local democracy. Various sources continue to report that other authorities are financially unsustainable and are at risk issuing a section 114 notice. This inquiry examines the current landscape of … Read more
15 Recommendations
13 Conclusions
1 Report
4 Oral sessions
6 Letters
4 Events
Activity timeline 16 events
14 May
2024
Correspondence
26 Mar
2024
Report published
1 Feb
2024
Report published
14 Dec
2023
Correspondence
6 Dec
2023
Oral evidence
6 Dec
2023
Formal meeting (oral evidence session) · Room 8, Palace of Westminster
5 Dec
2023
Correspondence
5 Dec
2023
Correspondence
5 Dec
2023
Correspondence
28 Nov
2023
Correspondence
20 Nov
2023
Oral evidence
20 Nov
2023
Formal meeting (oral evidence session) · The Grimond Room, Portcullis House
Oral evidence sessions 4 sessions
6 Dec 2023
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Oral Evidence
Joanna Key · Department for Levelling Up, Housing and Communities Nico Heslop · Ministry of Housing, Communities and Local Government Rt Hon Michael Gove · Department for Levelling Up, Housing and Communities
20 Nov 2023
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Oral Evidence
Nico Heslop · Ministry of Housing, Communities and Local Government Simon Hoare MP · Department for Levelling Up, Housing and Communities
13 Nov 2023
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Oral Evidence
Abdool Kara · National Audit Office Bob Watson · Surrey Heath Borough Council Gary Fielding · North Yorkshire Council Jonathan Carr-West · Local Government Information Unit Lorna Baxter · Association of Local Authorities’ Treasurer Societies Mr David Phillips · Institute for Fiscal Studies Paul Dossett · Grant Thornton Steve Thompson · Blackpool Council
8 Nov 2023
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Oral Evidence
Councillor Barry Lewis · County Councils Network Councillor Claire Holland · London Councils Councillor Graham Chapman · SIGOMA Councillor John Fuller OBE · Local Government Association Councillor Sam Chapman-Allen · District Councils Network Stephen Jones · Core Cities UK
Title HC No. Published Items Response
Third Report - Financial distress in local authorities HC 56 1 Feb 2024 28 Responded
Recommendations & Conclusions
13 results
Clear
9 Conclusion Accepted
Third Report - Financial distress …
Business rates system is outdated, complex, misaligned, disproportionately impacting deprived local authorities.
The business rates system is overly complex, outdated and in urgent need of reform. The baselines used in the business rates retention scheme are over 10 years out of date and their continued use is causing a significant misalignment between … Read more
Government Response
The government states it completed a review in 2021 and passed the Non-Domestic Rating Act 2023. It will not reset the business rates retention system before 2025-26, but agrees to consider further improvements in the next Parliament.
Ministry of Housing, Communities and Local Government
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11 Conclusion Accepted
Third Report - Financial distress …
Children's social care reforms lack sufficient short-term financial support for local authorities.
We agree with the Government that comprehensive reform of the children’s social care system is urgent and necessary. We are concerned, however, at the receding prospect of timely delivery of reforms and note that, despite the additional funding that the … Read more
Government Response
The government agrees on the urgency of children's social care reform and has provided £1.5 billion in additional grant for social care for 2024-25, including a recent £500 million uplift. It also committed £165 million over four years to expand children's home capacity and is exploring ways to combat profiteering.
Ministry of Housing, Communities and Local Government
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12 Recommendation Accepted
Third Report - Financial distress …
Work urgently with local authorities to develop short-term support for children's social care.
The Government must work urgently with local authorities to better understand their short-term budgetary pressures in this area and work to develop a package of support and funding to enable continued service delivery while wider system reforms are implemented. (Paragraph … Read more
Government Response
The government agrees on the urgency of children's social care reform and has announced £1.5 billion in additional grant funding for social care for 2024-25, including a recent £500 million uplift. It also committed £165 million over four years to expand children's home capacity and is exploring ways to combat profiteering.
Ministry of Housing, Communities and Local Government
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13 Recommendation Accepted
Third Report - Financial distress …
Review ways to facilitate local authority collaboration for direct delivery of children's care services.
The Government should support local authorities by reviewing possible ways of facilitating greater collaboration across local authorities so that they can collectively deliver more children’s care services directly rather than through private suppliers. Read more
Government Response
The government commits to supporting greater collaboration among local authorities for collectively delivering care services, citing ongoing co-design work and the Regional Care Cooperative pathfinder programme. It also provided capital funding to increase local authority provision and will publish proposals to combat profiteering later this year.
Ministry of Housing, Communities and Local Government
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14 Conclusion Accepted
Third Report - Financial distress …
Local authorities face acute financial pressures for adult social care, requiring sustainable funding increases.
While the additional funding announced in Autumn Statement 2022 has provided some brief respite for local authorities facing particularly acute pressures, a consistent and sustainable increase in funding is required. We have heard evidence of ongoing concerns about the continuing … Read more
Government Response
The government details significant additional funding of up to £8.6 billion over two years and £1.5 billion in grant increases for 2024-25 for adult social care, arguing this addresses the pressures and enables local authorities to improve services.
Ministry of Housing, Communities and Local Government
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15 Recommendation Accepted
Third Report - Financial distress …
Plan a sustainable mechanism to deliver billions in annual funding for adult social care.
We reiterate the recommendation we made in our July 2022 report Long-term Funding of Adult Social Care, that the Government needs to recognise the need for more funding to local authorities for delivery of adult social care, in the order … Read more
Government Response
The government has recognized the pressures in adult social care, making available up to £8.6 billion of additional funding over two years, including over £1.5 billion in new grants for 2024-25, to support local authorities in delivering social care.
Ministry of Housing, Communities and Local Government
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17 Conclusion Accepted
Third Report - Financial distress …
Funding for Special Educational Needs provision is insufficient to meet demand from EHC plans.
The rise in numbers of EHC plans following the Children and Families Act 2014 has significantly increased demand for more costly forms of SEND provision and home to school transport. The funding available to local authorities, through the Dedicated Schools … Read more
Government Response
The government agrees on the importance of tackling SEND provision costs, highlighting a 60% rise in the high needs budget to £10.5 billion by 2024-25, and detailing support programmes like Safety Valve and Delivering Better Value with £1 billion in additional funding to help local authorities manage deficits.
Ministry of Housing, Communities and Local Government
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18 Conclusion Accepted
Third Report - Financial distress …
Temporary funding fails to resolve fundamental mismatch in Dedicated Schools Grant and SEND costs.
The Government’s use of the statutory override and one-off ‘safety valve’ funding are temporary measures and do not address the underlying mismatch between demand, costs, and annual Dedicated Schools Grant funding. They will not prevent local authorities from accumulating further … Read more
Government Response
The government acknowledges the concern about funding mismatches but states it is already addressing the issue through significant increases to the high needs budget, existing Safety Valve and Delivering Better Value in SEND programmes with additional funding, and published guidance.
Ministry of Housing, Communities and Local Government
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20 Conclusion Accepted
Third Report - Financial distress …
Improved school provision insufficient to address EHC plan demand or short-term financial pressures.
It is clear that the Government’s aim to improve existing mainstream and locally available special school provision will not be sufficient on its own to influence parents’ Financial distress in local authorities 45 or carers’ views on Education, Health and … Read more
Government Response
The government highlights its existing efforts, including the SEND Green Paper and Improvement Plan, which aim to establish a single national system, implicitly addressing concerns about sufficiency and timing, and stating a further review is unnecessary.
Ministry of Housing, Communities and Local Government
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21 Recommendation Accepted
Third Report - Financial distress …
Agree realistic steps and sufficient funding with local authorities to eliminate DSG deficits.
The Government should provide clarity to local authorities on its specific expectations for resolving existing DSG budget deficits, and agree with local authorities a set of realistic and achievable steps, supplemented by sufficient additional funding, for eliminating these existing budget … Read more
Government Response
The government states it is already working to provide clarity and support to local authorities through existing programmes like Safety Valve and Delivering Better Value in SEND. These programmes involve bespoke support, individualised local plans, and around £1 billion in additional funding to help authorities sustainably manage their high needs systems and eliminate DSG deficits.
Ministry of Housing, Communities and Local Government
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23 Recommendation Accepted
Third Report - Financial distress …
Assess and publish benefits of statutory guidance for less costly shared home-to-school transportation
Additional funding for home-to-school transport is necessary in the short-term. Therefore, the Government should assess the benefits of introducing new statutory guidance aimed at encouraging the use of less costly forms of shared transportation. In response to this Report, the … Read more
Government Response
The government states existing statutory guidance already empowers local authorities to make suitable travel arrangements and avoid expensive individual transport. It outlines the SEND and Alternative Provision Improvement Plan and investment in new provision that aims to reduce home-to-school travel costs over time, but does not commit to additional short-term funding or new statutory guidance.
Ministry of Housing, Communities and Local Government
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24 Conclusion Accepted
Third Report - Financial distress …
Delay in increasing Local Housing Allowance rates exacerbated family housing crisis
We welcome the Government’s decision to increase Local Housing Allowance rates to the 30th percentile of local market rents from 1 April 2024. However, this is an urgent matter that required the Government’s immediate action. It is therefore disappointing that … Read more
Government Response
The government acknowledges the importance of stable housing, confirms the £1.2 billion investment to increase LHA rates to the 30th percentile from April 2024, and commits to annual reviews of LHA rates. It also highlights ongoing funding for Discretionary Housing Payments and wider affordable housing programmes.
Ministry of Housing, Communities and Local Government
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28 Recommendation Accepted
Third Report - Financial distress …
Explore and implement fundamental reforms for social care funding and delivery methods
The next Government must ensure that it explores all options for fundamental reform of funding and delivery of social care services and implements reforms that address the underlying causes of the acute funding and delivery pressures that local authorities are … Read more
Government Response
The government outlines its ongoing commitment to extensive system-wide social care reform, citing the People at the Heart of Care white paper, £700 million investment for adult social care, new CQC assessments, and £200 million for children's social care reforms through Pathfinders.
Ministry of Housing, Communities and Local Government
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Government Response AI assessment · 28 of 15 classified
Accepted 13
Accepted in Part 2
Acknowledged 4
Deferred 3
Not Addressed 1
Rejected 5
Total 15 recs + 13 conclusions
Correspondence 6 letters
14 May 2024 To committee Letter from the Chair to the Parliamentary Under Secretary of State for Local Government dated 13 May 2024 concerning the Government’s response to the Committee’s Financial Distress in Local Authorities Report
Parliament page
14 Dec 2023 To committee Letter from the Chair to the Secretary of State dated 13 December 2023 concerning Financial Distress in Local Authorities
Parliament page
5 Dec 2023 To committee Letter from Councillor Susan Hinchcliffe relating to Financial Distress in Local Authorities, dated 29 November 2023.
Parliament page
5 Dec 2023 To committee Letter from CIPFA, relating to Financial Distress in Local Authorities, dated 30 November 2023
Parliament page
5 Dec 2023 To committee Letter from the Chair to Chartered Institute of Public Finance and Accountancy dated 27 November 2023 concerning changes to local government financing
Parliament page
28 Nov 2023 To committee Letter from the Chair to the Secretary of State dated 27 November concerning Financial Distress in Local Authorities
Parliament page