Ministers accused of ‘complacency’ over unsustainable £5 billion local council funding gap

Ministers have been accused of complacency by MPs in the face of a looming cash crisis for local councils in England.

The Commons Public Accounts Committee warned authorities were facing an “unsustainable” £5 billion funding gap by the end of the decade unless the Government steps in with additional funding.

Despite increasing numbers of councils showing signs of “financial stress” following seven years of central government cuts, it said the Ministry of Housing, Communities and Local Government (MHCLG) had yet to develop a plan to secure their long-term financial future.

It sharply criticised the ministry for being “overly reliant” on obtaining a favourable settlement in next year’s spending review to resolve the financial difficulties.

“This is particularly complacent given that the previous spending review settlement resulted in many local authorities having to rely on reserves to fill the gaps in funding. This is an unsustainable situation,” it said.

The committee said that while Theresa May had announced a £20 billion-a-year cash injection for the NHS, it did not include any additional funding for social care, which is provided by local authorities.

“Given that social care is the other half of the equation, it is vital that there is a long-term solution,” it said.

Committee chairwoman Meg Hillier said the MHCLG needed to show it understood the pressures on councils and the impact on local residents who relied on their services.

“There is only so far the elastic can be stretched before it snaps. Yet, as our report makes clear, central government’s response to this looming crisis smacks of complacency,” she said.

“Councils seeking to set budgets that are both sustainable and provide value for money need far greater clarity on the implications of changes to the way they are funded, and the amount of money they will have available.

“Central government’s view is, in effect, that it expects everything to work out in the end. We beg to differ.”

An MHCLG spokesman said: “Local authorities are responsible for their own funding decisions, but over the next two years, we are providing councils with £90.7 billion to help them meet the needs of their residents, including social care.

“We recognise the pressures councils are facing, so we are working with local government to develop a funding system for the future.

“On top of this, we are giving them the power to retain more of the income they get from business rates so they can use it to drive further growth in their area.”

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