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
5 results
Clear
3 Conclusion Rejected
Third Report - Financial distress …
Council tax is outdated, regressive, and disproportionately impacts deprived local authorities' funding.
There is widespread agreement that Council tax is outdated, regressive, and long overdue for reform. The Government’s increasing reliance on council tax to fund local authorities is causing a disproportionately negative impact on funding levels for authorities in the most … Read more
Government Response
The government acknowledges the need to improve the local government finance landscape in the next Parliament but states it has no plans to revalue council tax bands and defends its existing referendum principles for council tax increases.
Ministry of Housing, Communities and Local Government
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4 Recommendation Rejected
Third Report - Financial distress …
Urgently reform council tax by revaluing properties and introducing additional bands.
We repeat the recommendation made in our July 2021 report, Local Authority Financial Sustainability and the Section 114 Regime, and our November 2023 report, Council Tax Collection: namely, that: the Government must urgently reform council tax by undertaking a revaluation … Read more
Government Response
The government rejects the recommendation for urgent council tax reform, specifically revaluation and additional bands, citing cost and potential impact on low-income households, deferring wider reform discussions to the next Parliament.
Ministry of Housing, Communities and Local Government
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5 Recommendation Rejected
Third Report - Financial distress …
Raise council tax referendum threshold in line with inflation; consider its long-term removal.
Furthermore, in the short-term, the Government must raise the referendum threshold for council tax at least in line with a relevant measure of inflation. In the longer- term we recommend that the Government considers removing the threshold entirely.
Government Response
The government rejects the recommendation, stating its manifesto commitment is to protect local taxpayers from excessive council tax increases and defending the existing referendum threshold system as a balance between local authority flexibility and protecting residents. It does not agree to raise or remove the threshold.
Ministry of Housing, Communities and Local Government
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16 Recommendation Rejected
Third Report - Financial distress …
Publish a 10-year plan to implement reforms from People at the Heart of Care white paper.
We also reiterate the recommendation we made in our July 2022 report for the Government to publish a 10-year plan for implementing the reforms set out in its white paper People at the Heart of Care. (Paragraph 95) Chapter 4: … Read more
Government Response
The government rejects the recommendation to publish a 10-year plan for adult social care reforms, stating that such plans are subject to future Spending Reviews and fiscal events which prevent long-term funding certainty. It highlights its 'Next steps to put people at the heart of Care' plan for the current Spending Review period instead.
Ministry of Housing, Communities and Local Government
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22 Recommendation Rejected
Third Report - Financial distress …
Commission independent review of EHC Plans for fundamental reform and financially sustainable SEND provision.
The Department should commission a cross-government independent review of Education, Health and Care Plans and consider fundamental reform of this system, to put SEND provision on a financially sustainable footing for local authorities whilst ensuring that all children and young … Read more
Government Response
The government rejects the recommendation for a new independent review, stating that a comprehensive SEND Review has already been completed, leading to a Green Paper and an Improvement Plan, making a further review unnecessary.
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