Competitive bidding on short-term funding pots for councils must end, ICAEW has said.
The chartered accountancy body has also called on the government to fix the crisis in local audit, as part of a series of recommendations to the chancellor ahead of the Autumn Statement.
ICAEW said its proposals, outlined in a submission and letter, would help improve the resilience of the country’s public finances.
The competitive short-term funding process should be replaced with long-term funding streams to give councils more certainty over future spending, the organisation stated.
“Councils waste time and money submitting bids for relatively small sums, and resources are then wasted in Whitehall assessing the bids,” ICAEW said. “This inefficiency diverts both councils and central government from focusing on delivering for local communities.”
Expanding on the crisis in local authority financial reporting and audit, ICAEW noted that most councils in England are now at least two years behind on completing audits, which it said were “critical to accountability, governance and effective financial management”.
A cross-government effort to clear the backlog of 918 delayed audit opinions is therefore “urgently needed”.
ICAEW has also proposed implementing a local public services strategy to “urgently address the significant problems” in local government “that stop councils from delivering the quality of public services that communities need, pushing many local authorities to the brink of bankruptcy and resulting in public money being wasted”.
Without attention to how local government is funded, meaningful reductions in regional inequalities are not possible, ICAEW added.
Other recommendations to support businesses include a strategy to address poor HMRC service standards; providing incentives for investment in net zero-aligned R&D; interventions to address business banking concerns; and boosting investment to address skills shortages and unlock growth.
Michael Izza, ICAEW’s chief executive, commented: “The structural failures in the local audit system, with nearly a thousand delayed audits, may have serious financial consequences for communities across England.
“We hope the chancellor will use the Autumn Statement as an opportunity to increase the resilience and sustainability of the public finances, with a cross-government effort to clear the mountain of delayed audit opinions to get the system back on track and by introducing long-term funding streams for councils.
“A clear strategy is needed to increase the resilience of the UK economy, underpinned by certainty, clarity, stability and the right long-term incentives to influence investment, employment and growth.”
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