The Funding and Sustainability of Local Government Finance
Housing, Communities and Local Government Committee
Closed
Inquiry
As Government seeks to reform local government finance, this inquiry will consider whether the local government finance system is fit for purpose and assess how it can meet the needs of local authorities and service users. It will explore how much control local authorities have over their own finances and …
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22
Recommendations
36
Conclusions
1
Report
4
Oral sessions
4
Events
Activity timeline 10 events
21 Oct
2025
2025
23 Jul
2025
2025
7 May
2025
2025
Oral evidence
7 May
2025
2025
Formal meeting (oral evidence session) · The Thatcher Room, Portcullis House
8 Apr
2025
2025
Oral evidence
8 Apr
2025
2025
Formal meeting (oral evidence session) · The Wilson Room, Portcullis House
11 Mar
2025
2025
Oral evidence
11 Mar
2025
2025
Formal meeting (oral evidence session) · The Thatcher Room, Portcullis House
11 Feb
2025
2025
Oral evidence
11 Feb
2025
2025
Formal meeting (oral evidence session) · The Grimond Room, Portcullis House
Oral evidence sessions 4 sessions
7 May 2025
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Oral Evidence
Jim McMahon MP · Ministry of Housing, Communities and Local Government
Nico Heslop · Ministry of Housing, Communities and Local Government
8 Apr 2025
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Oral Evidence
Abdool Kara · National Audit Office
Dan Bates · OnTor Limited
Gareth Davies · National Audit Office
Jane Pearson · Ribble Valley Borough Council
Owen Mapley · Chartered Institute of Public Finance and Accountancy (CIPFA)
Rob Powell · Warwickshire County Council
Vicky Davis · National Audit Office
11 Mar 2025
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Oral Evidence
Councillor Barry Lewis · County Councils Network
Councillor Bill Revans · Somerset Council
Councillor Grace Williams · London Councils
Councillor Jeremy Newmark · District Councils Network
Councillor Neghat Khan · Nottingham City Council
Councillor Peter Marland · Local Government Association
Councillor Tony Dyer · Bristol City Council
11 Feb 2025
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Oral Evidence
Aileen Murphie
Charlotte Pickles · Reform
David Phillips · Institute for Fiscal Studies
Jonathan Carr-West · Local Government Information Unit
Professor Andy Pike · Newcastle University
Professor Tony Travers · London School of Economics
Stuart Hoddinott · Institute for Government
Reports 1 report · click to expand
| Title | HC No. | Published | Items | Response |
|---|---|---|---|---|
| 2nd Report - The Funding and Sustainability of Local Government … | HC 514 | 23 Jul 2025 | 58 | Responded |
Recommendations & Conclusions
6 results
1
Conclusion
Acknowledged
2nd Report - The Funding and Susta…
Major local government reorganisation lacks clear vision, risking embedding existing systemic flaws.
The Government is undergoing the most significant local government reorganisation in decades. Substantial change, if not driven by a clear vision of what local government should be for and should be achieving, risks embedding undesirable elements of the current system …
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Government Response
The government acknowledged the importance of strong local government, referencing a statement by the former Deputy Prime Minister on building a modern state, and committed to continuing engagement with councils on necessary reforms, including funding.
Ministry of Housing, Communities and Local Government
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10
Conclusion
Acknowledged
2nd Report - The Funding and Susta…
Temporary central government funding is required to rebuild damaged preventative services.
Rebuilding and strengthening damaged preventative services will require temporary increases in central government funding before the demand for acute services starts to drop. (Conclusion, Paragraph 49)
Government Response
The government is reviewing and updating the New Burdens Doctrine to ensure its effectiveness, including considering how to better account for bidding costs and streamline the payment process for councils.
Ministry of Housing, Communities and Local Government
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33
Conclusion
Acknowledged
2nd Report - The Funding and Susta…
Record levels of homelessness among families and children strain local authority finances
It is a source of national shame that cases of homelessness, particularly among families and children, are at record levels and continue to rise. This is placing considerable strain on the finances of local authorities. We repeat the findings of …
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Government Response
The government acknowledges the concern about rising homelessness and outlines specific actions, including allocating £1 billion for the Household Support Fund and Discretionary Housing Payments and £950 million for the Local Authority Housing Fund to increase temporary accommodation supply.
Ministry of Housing, Communities and Local Government
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35
Conclusion
Acknowledged
2nd Report - The Funding and Susta…
Multi-year funding settlements insufficient to solve underlying local government financial problems
We support the return to multi-year funding settlements, but the local government funding reforms announced to date will not solve the underlying problems in the system by themselves. (Conclusion, Paragraph 127)
Government Response
The government acknowledges the need for local government funding reform, confirming its commitment to multi-year allocations through the 2026-27 LGFS and simplifying the funding landscape via the Fair Funding Review 2.0.
Ministry of Housing, Communities and Local Government
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44
Conclusion
Acknowledged
2nd Report - The Funding and Susta…
Business rates system remains a concern, harming growth and entrenching deprivation.
We acknowledge the Government’s current plans to reform business rates and the Business Rates Retention system, including the business rates reset and the addition of new multipliers. However, we remain concerned that the business rates system can harm growth, disincentivise …
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Government Response
The government reiterates its commitment to transforming the business rates system to create a fairer system that supports investment, and acknowledges the importance of business rates in local government funding.
Ministry of Housing, Communities and Local Government
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51
Conclusion
Acknowledged
2nd Report - The Funding and Susta…
Exceptional Financial Support via capitalisation directions weakens long-term council finances and investment.
Exceptional Financial Support (EFS) by means of capitalisation direction is a stopgap measure that avoids section 114 notices and allows councils to produce short-term balanced budgets, but can weaken councils’ finances and capital investment in the long term. Capitalisation directions …
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Government Response
The government states it is committed to fair funding distribution and has consulted on transitional arrangements and financial flexibilities for local authorities, with further details on an updated support framework to be set out in the autumn.
Ministry of Housing, Communities and Local Government
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