UK Inquiry Tracker

Local Government Financial Sustainability

Public Accounts Committee Closed Inquiry

Opened: 15 Jan 2025 Closed: 21 Aug 2025 Parliament page

Local government is under extreme financial pressure. The National Audit Office found in 2021 that English local authorities had lost around a quarter of their spending power over the preceding decade, with government-funded spending power over 50% lower. While a £4.5bn funding increase was provided to local authorities in 2024-25 … Read more Local government is under extreme financial pressure. The National Audit Office found in 2021 that English local authorities had lost around a quarter of their spending power over the preceding decade, with government-funded spending power over 50% lower. While a £4.5bn funding increase was provided to local authorities in 2024-25 by Government as compared to 2023-24, councils continue to experience rising costs and increased demand across a whole range of services. The PAC’s 2022 report on the local government finance system warned of a chronic lack of accountability and transparency in the system which would hamper recovery from the COVID-19 pandemic. It highlighted the real risk that much-heralded extra funding in the 2021 spending review would only allow local government to stand still, rather than addressing the significant service pressures and risks built up over the decade. The NAO’s 2025 overview report looked at what local government in England spends, how this spending is funded and the effect of changes in recent years, with the aim of enhancing financial transparency in the sector. Based on the NAO report, the PAC will hear from senior officials from the Ministry of Housing, Communities and Local Government (MHCLG) and HM Treasury on subjects including: Drivers of financial distress for local authorities, including adult and children’s social care, temporary accommodation, and special educational needs and disability services for children and young people; Challenges and support for individuals in accessing local authority services; and Support for financially failing local authorities and action to tackle systemic issues. Please look at the requirements for written evidence submissions and note that the Committee cannot accept material as evidence that is published elsewhere. Please note that the Committee is unable to consider or assist with individual cases and does not have a role in the audit or financial oversight of individual local authorities. If you have evidence on these issues please submit it here by 23:59 on Thursday 20 March 2025. Show less

10 Recommendations

21 Conclusions

1 Report

1 Oral session

5 Letters

1 Event

Activity timeline 8 events

27 Apr
2026

Correspondence

Letter from The Permanent Secretary to the Ministry of Housing, Communities and Local Government relating to Treasury Minutes progress rep…

8 Jan
2026

Correspondence

Letter from the Permanent Secretary at the Ministry for Housing, Communities & Local Government relating to Local Government Financial Sust…

18 Sep
2025

Report published

Treasury minutes: Government response to the Committee of Public Accounts on the Thirty-first report from Session 2024-26

4 Sep
2025

Correspondence

Letter from the Permanent Secretary of the HM Treasury relating to the response to Recommendation 3 of the 31st Report of Session 2024-25, …

7 Jul
2025

Correspondence

Letter from the Permanent Secretary of the Ministry of Housing, Communities and Local Government relating to the launch of the Local Govern…

18 Jun
2025

Report published

31st Report - Local Government Financial Sustainability

24 Apr
2025

Correspondence

Letter from the Permanent Secretary of Ministry of Housing, Communities and Local Government relating to the oral evidence session held on …

3 Apr
2025

Oral evidence

Oral evidence session

Oral evidence sessions 1 session

3 Apr 2025

View on parliament.uk

Conrad Smewing · HM Treasury Councillor Peter Marland · Milton Keynes City Council Councillor Peter Marland · Local Government Association Iain Murray · Chartered Insititute of Public Finance and Accountancy (CIPFA) Nico Heslop · Ministry of Housing, Communities and Local Government Professor Tony Travers · The LSE School of Public Policy Sarah Healey · Department for Digital, Culture, Media and Sport Will Garton · Department for Levelling Up, Housing and Communities Will Garton · Ministry of Housing, Communities and Local Government

Reports 1 report · click to expand

Title	HC No.	Published	Items	Response
31st Report - Local Government Financial Sustainability	HC 647	18 Jun 2025	31	Response document linked

Recommendations & Conclusions

31 results

2 Conclusion

31st Report - Local Government Fin…

Implement plan to simplify and consolidate cross-government grant funding for local authorities by autumn 2025.

Local authorities’ ability to improve outcomes for people is undermined by an overly complex funding system, with competing policy demands and funding streams. Local authorities receive funding through the annual local government finance settlement, which includes formula-based grants and locally … Read more

HM Treasury

Local Government Financial Sustainability

Activity timeline 8 events

Oral evidence sessions 1 session

Reports 1 report · click to expand

Recommendations & Conclusions

Implement plan to simplify and consolidate cross-government grant funding for local authorities by autumn 2025.

Provide details on how local government finance settlement will support greater investment in prevention.

Conduct post-implementation review of National Insurance Contributions increase impact on local government services.

Set out solution for local authority financial sustainability before statutory override ends in March 2026.

Set out detailed timetable of local government finance reforms, implementation plans, and transitional arrangements.

Committee received evidence on local government financial sustainability from diverse stakeholders.

Significant delays persist in local government external audit assurance, creating information gaps.

Increased spending on SEND and temporary accommodation fails to meet people's needs.

MHCLG lacks comprehensive outcomes framework for local government, focusing on specific spending areas.

Local government funding system remains excessively complex, eroding transparency and public trust.

Single-year finance settlements hinder local authority long-term planning; multi-year committed for 2026–27.

Numerous ring-fenced grants create administrative burden for local authorities, prompting consolidation efforts.

Lack of joined-up working results in competing funding demands for local authorities.

Spending shifts from preventative to late intervention services, increasing later costs and worsening outcomes.

HM Treasury implements multi-year settlements to incentivise upstream prevention spending.

MHCLG allocates significant grants to enhance children's social care and homelessness prevention.

April 2025 employer NICs rise supported by government funding for public sector.

HM Treasury NICs compensation excludes indirect cost increases passed onto public sector.

MHCLG consulted on NICs allocation for local authorities, noting varied funding practices.

Employer NICs and National Living Wage rises create significant cost pressures for care providers.

MHCLG and HM Treasury failed to assess NIC changes impact on local government services.

LGA estimates over £1 billion NICs funding shortfall, unassessed by MHCLG.

Exceptional Financial Support for councils allows capital asset use for revenue, not new funding.

Exceptional Financial Support is no longer exceptional and lacks long-term funding strategy.

Government has not yet presented a solution for managing post-2026 SEND budget deficits.

Fundamental reform of the SEND system is essential to address ongoing deficits.

Central government acknowledges outdated local government finance system and plans reforms.

MHCLG aims to align local funding with needs but acknowledges reform distribution risks.

MHCLG acknowledges insufficient funding, aiming for efficiency and demand management amid uncertainties.

Multiple complex local government reforms and reorganisation are happening simultaneously.

Local government reforms and reorganisation present opportunities but begin from a fragile financial position.

Correspondence 5 letters