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
View on parliament.uk
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
View on parliament.uk
Oral Evidence
Nico Heslop · Ministry of Housing, Communities and Local Government Simon Hoare MP · Department for Levelling Up, Housing and Communities
13 Nov 2023
View on parliament.uk
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
View on parliament.uk
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
4 results
Clear
6 Conclusion Acknowledged
Third Report - Financial distress …
Additional capital flexibilities could help local authorities during financial distress.
We have previously recommended that the Government widens the funding base of local authorities and grants more flexibility over local taxes and other revenue raising powers. We therefore welcome the Government’s call for views on local authority capital flexibilities and … Read more
Government Response
The government confirms it launched a call for views on local authority capital flexibilities to encourage invest-to-save activity and is considering responses. A publication is expected before the summer recess, and some financial flexibilities have been agreed with specific councils.
Ministry of Housing, Communities and Local Government
View details
8 Recommendation Acknowledged
Third Report - Financial distress …
Limit capital funding flexibilities to invest-to-save and closely monitor uptake for unintended consequences.
The Government should ensure that the implications of any additional flexibilities it grants on capital funding are carefully considered. We recommend that these are limited to extending flexibilities over invest-to-save activity only. The Government must closely monitor local authorities’ uptake … Read more
Government Response
The government states it is considering responses to its call for views on capital flexibilities, acknowledging the need for balance to prevent unsustainable financial practices. It will publish a response before the summer recess but does not commit to the specific limitations or monitoring mechanisms requested at this stage.
Ministry of Housing, Communities and Local Government
View details
25 Recommendation Acknowledged
Third Report - Financial distress …
Maintain Local Housing Allowance rates at 30th percentile of market rents annually
We recommend that the Government reconsider its position on re-freezing local housing allowance rates from 2025–26 onwards. Instead, the Government must maintain LHA rates at least at the 30th percentile of local market rents each year to ensure that those … Read more
Government Response
The government acknowledges the importance of stable housing and commits to reviewing Local Housing Allowance rates every year, considering factors like local rents and the broader fiscal context. It highlights the £1.2 billion investment from April 2024 to increase LHA rates to the 30th percentile, but does not commit to maintaining this level annually from 2025-26 onwards.
Ministry of Housing, Communities and Local Government
View details
26 Conclusion Acknowledged
Third Report - Financial distress …
Prioritise fundamental reforms for local authority funding and service delivery systems
The Government elected in the next UK General Election is faced with the task of designing and implementing a series of fundamental reforms to the way in which local authorities are funded, the services that they are currently required to … Read more
Government Response
The government acknowledges the need to improve the local government finance system in the next Parliament and commits to significant consultation, but explicitly states it does not support land value taxation.
Ministry of Housing, Communities and Local Government
View details
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