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

Select Committee

Public Accounts Committee HC 646 2 February 2022

Report Status Government responded

Conclusions & Recommendations 29 items (15 recs)

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Government Response (AI assessment · 28 of 29 classified)

Accepted 12

Acknowledged 10

Deferred 3

Not Addressed 3

Government response

Treasury minutes: Government response to the Committee of Public Accounts on the Thirty Fourth report from Session 2021-22 · published 28 Apr 2022

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Recommendations & Conclusions

4 results

2 Recommendation Not Addressed

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

Recommendation

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

Government Response Summary

The government discusses broadband coverage and targets, which is not relevant to the recommendation about local government finance sustainability.

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6 Recommendation Not Addressed

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

Recommendation

The sector is still facing uncertainty and stop-gap financial arrangements until such time as the longer-term reforms are put in place. The sector is once again faced with a single-year settlement for the 2022–23 finance year. It has now had … Read more

Government Response Summary

The government discusses broadband coverage and plans for market surveys and contract signings, which is not relevant to the recommendation about supporting the local government sector through an interim period.

HM Treasury

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7 Recommendation Not Addressed

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

Recommendation

It is still not clear how the government will take a strategic, cross-government approach to rationalising local authority funding, which is particularly important for cross-cutting priorities like net zero and levelling up. Responding to concerns about the burden of bidding … Read more

Government Response Summary

The government's response is a preamble and introduction to the overall document, and doesn't address the recommendation about rationalising local authority funding.

HM Treasury

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21 Conclusion

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

Conclusion

We have previously been critical of the Department for Education’s understanding of costs within children’s social care services, and we have not yet been reassured that funding for local authorities to support unaccompanied asylum-seeking children, and care leavers who were … Read more

HM Treasury

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