Ministers in denial over ‘perilous’ financial plight of local authorities, MPs warn

Ministers have been accused by MPs of being “in denial” over the “perilous” state of local government finances in England.

After years of cuts to Whitehall funding, the Commons Public Accounts Committee (PAC) said councils were under “enormous pressure” just to main essential services such as adult and children’s social care.

However it said the Government’s response had been a series of “short-term fixes” to enable authorities to keep going with no clear plan to put them on a sustainable financial footing for the future.

Over the past eight years, central government funding to English local authorities has been cut by almost half, while demand for services has risen, with the rate of looked-after children at 25 year high, the PAC said.

Between 2010-11 and 2016-17, council spending on services fell by 19.2% in real terms while the Local Government Association estimates authorities face a £3.2 billion shortfall by 2019-20.

The Government responded by announcing a £1.4 billion cash injection in the Budget in October.

But with half the money due to be spent before the end of the current financial year, the PAC said the Ministry of Housing, Communities and Local Government (MHCLG) had been unable provide assurances it would be used effectively.

“Some councils are now in an extremely worrying position: overspending their budgets for social care, reducing key services, falling back on financial reserves and increasingly relying on generating other sources of income, which comes with greater risks,” the committee said.

“The Government has had to inject large amounts of additional funding to ensure that the local authority sector can keep going in the short-term: £1.4 billion in the 2018 budget.

“Yet disturbingly, there is still no sign that the department has a clear plan to secure the financial sustainability of local authorities in the long-term.”

The committee said the MHCLG had shown “an unacceptable lack of ambition” for the sector with no aspiration for local government finances beyond “merely coping”.

It said it was “deeply dismayed” the MHCLG seemed to view the issue in terms of a small set of statutory services authorities are required to provide by law – predominantly social care – rather than the full range of services residents expect from their council.

“There are a range of other services, such as libraries and youth services, which local people can reasonably expect their council to provide, but which the department does not consider rigorously when determining whether local authorities are financially sustainable,” it said.

“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.”

The committee chairwoman Meg Hillier said: “The Government is in denial about the perilous state of local finances. It insists the sector is sustainable yet is unwilling or unable to back up this claim. Flimsy assertions have no place in financial planning.

“Government needs to get real, listen fully to the concerns of local government and take a hard look at the real impact funding reductions have on local services. And then it needs to plan properly for the long-term.”

Communities Secretary James Brokenshire said the current settlement would pave the way for “a fairer, more self-sufficient and resilient future” for local government.

“That is why local authorities will have more control over the money they raise and a real terms increase in their core spending power,” he said.

“The settlement also recognises the pressures councils face in meeting growing demand for services and rewards their impressive efforts to drive efficiencies and rebuild our economy.”

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