The government is “in denial” over the state of council finances according to a report published today by the Public Accounts Committee (PAC).
The report accuses the government of lacking a clear plan for ensuring the long-term sustainability of the sector, and criticises it for failing to heed previous warnings: “We are deeply frustrated to have to repeat the same concerns about the sustainability of the sector and the ability of local authorities to provide the vital services that taxpayers need.”
Since the PAC last reported in July 2018, £1.4bn in additional funding has been made available to councils over 2018-19 and 2020-21, but the government wants £700m of this to be spent before the end of the financial year to March 2019.
“The department [the Ministry of Housing, Communities and Local Government – MHCLG] is unable to provide a convincing answer as to how it can be confident that funding provided so late in the year will be spent efficiently and on the services it was intended for.”
The report recommends that the MHCLG should work with local authorities to assess the impact of providing funding so late in the budgetary cycle rather than through long-term funding arrangements.
“The department should, within 12 months, write to the committee detailing the findings from this work and how it will use this evidence base to ensure that both its own funding schemes and those of other departments are structured and announced in a way that delivers maximum value for money.”
The report says that the ministry should also write to the committee by May 2019 laying out what measures it will take over the medium term to attain a stronger financial position.
“This should reflect its consideration of a full range of options to support the sector financially rather than simply a reliance on the forthcoming Spending Review and a move to greater local retention of business rates.”
The PAC goes on to say: “It is worrying that the department does not know what its minimum expectations are of the full range of services that local authorities are expected to provide.”
It also says that the government lacks detailed information on the costs of providing core services to a minimum service expectation.
To fill the gap, it recommends that the ministry should, by May 2019, publish the minimum service levels it has used to calculate service costs for statutory services.
The report calls for a more complete and rational approach to all the services provided by local authorities.
“We are deeply dismayed that the department views the financial sustainability of local authorities solely in terms of a small set of statutory services rather than the full range of services local people need.”
“We are concerned that the department’s narrow view of service provision risks giving a misleading picture of the sustainability of services as a whole.”
In a statement accompanying the report, Meg Hillier the chair of the PAC elaborated on this point: “It is extremely troubling that the government views the financial sustainability of councils solely in terms of statutory services, rather than full range of services local people need and can reasonably expect councils to provide.
“Cutting youth services, for example, may simply build pressures on statutory services and we expect government to explain how it takes account of these shunted costs in reaching its conclusions.”
The committee says the ministry should write to it by May 2019 setting out how these services are accounted for in its assessment of sustainability, and provide an assessment of how the loss of these services can have knock-on effects on the statutory services.
The PAC criticises the ministry for saying that the sector is sustainable without providing evidence for this, and wants it to write to it by May 2019 setting out how it assures itself that the sector is sustainable.
As part of this it calls on the ministry to provide a so-far lacking definition of ‘financial sustainability’.
The report notes that the conclusions of the ministry on the sector’s sustainability are at odds with those of other bodies, such as the Local Government Association, which has said it thinks local authorities face a funding gap of £3.2bn by 2019-20.
The PAC recommends that the ministry write to it by May explaining how its estimates for funding needs compare with those of the LGA, and why its conclusions are so different from those of other bodies.
Responding to the report Cllr Richard Watts, chair of the Local Government Association’s Resources Board, said: “We agree with the committee that the financial sustainability of local government cannot be defined by the ability of councils to just provide statutory duties.
“Pressures continue to grow in children’s services, adult social care, and efforts to tackle homelessness and this is leaving increasingly less money for councils to fund other discretionary services, such as the maintenance of parks, certain bus services, cultural activities and council tax support for those in financial difficulty – to plug growing funding gaps.
“Fully funding councils is the only way to ensure councils can continue to provide all of the valued local services which make such a positive difference to communities and people’s lives.”
Last week the LGA launched its campaign to influence the forthcoming Spending Review by warning about the growing risk to vital local services if the government does not take action to secure the financial sustainability of the sector.
The LGA’s report said that between 2010 and 2029 councils will have lost 60% of their central government grant, and that some councils are being pushed to the brink.
The non-core but highly important services vulnerable to being cut back cited by the LGA include bus services, council tax support, and tackling fly-tipping.
In his response to the report CIPFA CEO Rob Whiteman, said: “Today’s report from the Public Accounts Committee reiterates CIPFA’s repeated calls for the government to enter into meaningful engagement with the local government sector to seek genuine long-term, sustainable solutions.
“It is widely accepted that the current funding model for local authorities is no longer viable, and without bold policy solutions vital public services will continue to be eroded in order to balance the budget.”
