Value for Money

Local government financial sustainability

Published 28 February 2025 7 recommendations Ministry of Housing, Communities and Local Government Local economyLocal governmentLocal service deliveryLocal services and housing nao.org.uk

Pressured public services and delays to reform the funding system are contributing to local authorities’ finances becoming unsustainable.

Recommendations (7)

Source: NAO Recommendations Tracker · PAC follow-up below

Accepted

Implemented

In Progress

NAO Confirmed

Ministry of Housing Communities and Local Government

Rec 1 Accepted Work in Progress

We recommend that MHCLG build on recent announcements to develop a whole-system approach to local government financial sustainability. This approach would consider interdependencies and consequences across services and departmental boundaries and should be underpinned by clear expectations of local government. It should do this by: ? taking the lead in building a cross-government approach to local government financial sustainability ? for this to be effective and to improve understanding of the wider impact of their choices on local authorities, other government departments must have an up-to-date understanding of the priorities, pressures and opportunities across services local authorities are expected to deliver;

Page 13, Recommendation A, Bullet 1 Q4 2028-29

Ministry of Housing Communities and Local Government

Rec 2 Accepted Work in Progress

We recommend that MHCLG build on recent announcements to develop a whole-system approach to local government financial sustainability. This approach would consider interdependencies and consequences across services and departmental boundaries and should be underpinned by clear expectations of local government. It should do this by: as part of the spending review, developing a plan for funding and service reform to address the financial and demand pressures on local authorities, focusing on long-term value for money underpinned by clear priorities across departmental boundaries.

Page 13, Recommendations, a, bullet two Q4 2028-29

Ministry of Housing Communities and Local Government

Rec 3 Accepted Work in Progress

We recommend that MHCLG: explore how the impact of preventative services can be evaluated and incentivised to deliver better outcomes and improved value for money

Page 14, Recommendation, b, bullet one Q4 2028-29

Ministry of Housing Communities and Local Government

Rec 4 Accepted Work in Progress

We recommend that MHCLG: work with the local government sector to improve the transparency and consistency of local authority reporting on reserves to aid understanding of local authorities? overall financial positions;

Page 14, Recommendations, b, bullet two Q4 2028-29

HM Treasury

Rec 5 Accepted Implemented

As part of the spending review, and to support a cross-departmental approach, we recommend that HM Treasury: work to provide a spending framework that supports the government?s plans for local government funding and service reform

Page 14, Recommendations, c, bullet one Q4 2025-26

Ministry of Housing Communities and Local Government

Rec 6 Accepted Implemented

We recommend that MHCLG: as a matter of urgency, work with DfE to support local authorities to sustainably manage their dedicated schools grant and address the cumulative deficits before the statutory override ends on 31 March 2026.

Page 14, Recommendations, b, bullet 3 Q4 2025-26 Department for Education

HM Treasury

Rec 7 Accepted Implemented

As part of the spending review, and to support a cross-departmental approach, we recommend that HM Treasury: incentivise government departments to invest in preventative services to deliver better outcomes and improved value for money

Page 14, Recommendations, c, bullet two Q4 2025-26

Parliamentary Committee Follow-Up

The Public Accounts Committee examined this NAO report and published its own recommendations. The government responds to PAC recommendations via Treasury Minutes.