UK Inquiry Tracker

Local Government Finance system: Overview and challenges

Public Accounts Committee Closed Inquiry

Opened: 21 Oct 2021 Closed: 7 Apr 2022 Parliament page

After a series of PAC reports on the state of local authority finances over the last year including on the system of local government audit ; local authority exposure to risky commercial investment and potential losses in Covid support schemes ; and the overall sustainability of the local authority finances … Read more

4 Recommendations

25 Conclusions

1 Report

1 Oral session

4 Letters

1 Event

Activity timeline 8 events

28 Apr
2022

Report published

Treasury minutes: Government response to the Committee of Public Accounts on the Thirty Fourth report from Session 2021-22

21 Apr
2022

Correspondence

Correspondence from Jeremy Pocklington CB, Permanent Secretary, Department for Levelling Up, Housing and Communities, re the committee’s re…

22 Feb
2022

Correspondence

Correspondence from Jeremy Pocklington CB, Permanent Secretary, Department for Levelling Up, Housing and Communities, re Lessons Learnt, da…

2 Feb
2022

Report published

Thirty-Fourth Report - Local Government Finance System: Overview and Challenges

11 Jan
2022

Correspondence

Correspondence from Catherine Frances Director General, Local Government, Strategy & Analysis Department for Levelling Up, Housing and Comm…

11 Jan
2022

Correspondence

Correspondence from Rt Hon Michael Gove, Secretary of State, Department for Levelling up, Housing and Communities Minister for Intergovernm…

29 Nov
2021

Oral evidence

Local Government Finance system: Overview and challenges

29 Nov
2021

Formal meeting (oral evidence session) · The Grimond Room, Portcullis House

Local Government Finance system: Overview and challenges

Oral evidence sessions 1 session

29 Nov 2021

View on parliament.uk

Local Government Finance system: Overview and challenges

Alex Skinner · Department for Levelling Up, Housing and Communities Catherine Frances · Department for Levelling Up, Housing and Communities Jeremy Pocklington · Ministry of Defence Will Garton · Department for Levelling Up, Housing and Communities

Reports 1 report · click to expand

Title	HC No.	Published	Items	Response
Thirty-Fourth Report - Local Government Finance System: Overview…	HC 646	2 Feb 2022	29	Responded

Recommendations & Conclusions

29 results

2 Recommendation

Thirty-Fourth Report - Local Gover…

Too often the Department has failed to act with sufficient urgency to address risks to...

Too often the Department has failed to act with sufficient urgency to address risks to financial sustainability in the sector, leading to problems becoming entrenched. This Committee warned in 2016 that the local capital finance framework might not be able … Read more Too often the Department has failed to act with sufficient urgency to address risks to financial sustainability in the sector, leading to problems becoming entrenched. This Committee warned in 2016 that the local capital finance framework might not be able to cope with changes in local authority activity, particularly in relation to investment in commercial property. The Department reacted by changing the guidance on local authority investments and on setting aside money to repay debts, but these proved ineffective in addressing key risks. Disappointingly, it took until 2020 before the Treasury took action to restrict borrowing for commercial investment, allowing billions of pounds to be borrowed and spent in the intervening period. In November 2021, the Department started consulting on legislative change to ensure all authorities act prudently and ensure they have the money to repay debts in future. The Department’s consultation was in response to local authority practices which were not fully compliant with the duty to make prudent revenue provision for borrowing. For example, some local authorities excluded a proportion of their debt when calculating their Minimum Revenue Provision (MRP); and some local authorities had used capital receipts instead of revenue resources for MRP. Meanwhile some local authorities have set aside much too little money, and they 6 Local Government Finance System: Overview and Challenges now cannot make up the difference promptly without threatening their financial position. In addition, current proposals to continue to use just guidance to encourage local authority audit committees to have an independent member, rather than make it compulsory, suggest the Department is still over-optimistic about the ability of such ‘soft’ changes to address risks. Recommendation: In its response to this report: • The Department needs to identify key areas of concern regarding the sustainability of local government finance and explain how these will be Show less

HM Treasury

Local Government Finance system: Overview and challenges

Activity timeline 8 events

Oral evidence sessions 1 session

Reports 1 report · click to expand

Recommendations & Conclusions

Too often the Department has failed to act with sufficient urgency to address risks to...

The Department did not act with sufficient urgency, nor has it set out an overarching...

The Department is making some welcome improvements to its oversight of the sector although it...

We are concerned the Department is worryingly complacent in its view that the spending review...

The sector is still facing uncertainty and stop-gap financial arrangements until such time as the...

It is still not clear how the government will take a strategic, cross-government approach to...

On the basis of a Report by the Comptroller and Auditor General, we took evidence...

This Committee highlighted in 2016 that the Department appeared complacent about the risks from local...

Where a local authority borrows, it must set aside money each year to repay the...

When we asked about a potential ballooning effect due to local authorities continually delaying and...

The Institute of Chartered Accountants in England and Wales (ICAEW) noted that while the local...

This Committee recently recommended the Department should set out a detailed plan and timetable for...

In 2018, this Committee recommended the Department should review the way local authority audit committees...

The Department’s Accounting Officer is responsible for the overall accountability system for local government, including...

This Committee recommended in 2016 that the Department should strengthen its understanding of the scale...

The Department told us that from April 2022, it will regularly collect much fuller information...

The Department told us about a policy paper it had recently published about its framework...

The spending review announced on 27 October 2021, covering 2022–23 to 2024–25, provided £4.8 billion...

The Department told us the spending review “gives local government, looking at the sectoral level,...

When we pressed witnesses about the fragile state of adult social care services and continuing...

We have previously been critical of the Department for Education’s understanding of costs within children’s...

This Committee noted in 2016 that local authorities were facing an uncertain environment due to...

We have previously concluded that the implications of reductions in service spending for service users...

The spending review confirmed the timing of the next and future business rates revaluations and...

We have previously recommended that reform of local government finance should take place in a...

A Local Government Association review found 448 individual grants to local authorities between 2015–16 and...

The new Secretary of State told the Housing, Communities and Local Government Committee that he...

The Treasury told us the balance between formula and competitive funding should be different for...

We noted the interactions between different government policy areas and the “tab” that ultimately falls...

Correspondence 4 letters