National Audit Office: MHCLG advances devolution plans with expansion of Strategic Authorities and local funding powers
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Central government is making good progress in delivering its aims
for English devolution, having established 18 Mayoral Strategic
Authorities (MSAs) by June 2026. Eligible MSAs can receive central
government funding via an Integrated Settlement', which offers
greater simplicity and flexibility, and could deliver better value
for money over time. But there is tension between MSAs'
expectations of autonomy and funding departments' ongoing
responsibility for how the money...Request free trial
The Ministry of Housing, Communities & Local Government (MHCLG) has made good progress in its devolution aims. To maximise the benefits, future scaling-up of the system will require MHCLG to ensure local bodies and government departments are able to manage the changed responsibilities, a new report from the National Audit Office has found.1 The December 2024 English Devolution white paper stated the need for central government to stop micromanaging local leaders' decisions and allow local bodies to operate with more freedom.2 One of the key elements of English devolution has been the creation of combined authorities.3 These bodies are now referred to as Strategic Authorities Foundation Strategic Authorities for non-mayoral bodies, and Mayoral Strategic Authorities (MSAs) for mayoral bodies through which it aims to allow local government more autonomy. Our report found that the government is making good progress in its plan for full coverage of Strategic Authorities across England, having created two Foundation Strategic Authorities and 18 MSAs by June 2026. MSAs that meet set criteria may be designated as Established' MSAs and permitted extra freedoms, most notably receiving central government funding through an Integrated Settlement.4 This approach offers greater simplicity and flexibility of funding. So far, central government has announced £15.9 billion of Integrated Settlement funding covering the period 2025-26 to 2029-30.5 The Integrated Settlement approach is largely well regarded by MSAs and sector groups. MSAs are starting to take the opportunity to be more creative and to think in a longer-term way about the programmes they deliver. These arrangements have the potential to deliver better value for money as they are rolled out more widely. Some MSAs are already requesting additional powers, responsibility and funding, indicating there is an appetite for more expansive arrangements. However, some more newly established MSAs may struggle to maximise the benefits of their Integrated Settlements in the future, if they do not build experience and capacity in government programme delivery. MHCLG is taking steps to provide relevant support through holding annual conversations with MSAs, making capacity funding multi-year and more reflective of an MSA's current capacity and level of maturity, and providing extra funding for staffing and administrative costs. As MSAs take on more funding and responsibilities, strengthened local scrutiny arrangements will be vital. To aid this, Local Scrutiny Committees will examine mayoral decisions and actions, and undertake thematic inquiries. Effective local scrutiny will also require a strong local audit system. But in recent times, the system has often failed to provide timely assurance, due to longstanding issues in the market including capacity, and the need to audit increasingly complex accounts to higher standards. Currently, MSAs that receive an Integrated Settlement are accountable to central government, primarily through an agreed Outcomes Framework.6 Some MSAs reported that the measures in their Outcomes Framework were too heavily shaped by national priorities, detracting from the aim of Integrated Settlement funding to focus on local requirements. MSAs also expressed concern that the number of measures that departments wanted to include in Outcomes Frameworks was disproportionate. These arrangements are new and therefore as yet untested as performance tools. There is a risk that, as more MSAs are established, capacity constraints within MHCLG and other departments might cause them to seek Outcomes Frameworks that are more template-like, with similar measures applied across many MSAs. While this would clearly reduce administrative burdens, it could also weaken the focus on local needs and circumstances. The National Audit Office has recommended that, ahead of the next Spending Review, MHCLG should work to actively manage the risks involved in scaling up the MSA system. It also recommends that MSAs should ensure they have robust arrangements in place to support local scrutiny and accountability. Gareth Davies, head of the NAO, said: MHCLG has done well so far in implementing its plans to set up Mayoral Strategic Authorities. The Integrated Settlement arrangements give welcome flexibility to dedicate spending where it is needed most. MHCLG should now ensure that the system through which Mayoral Strategic Authorities are accountable to central government is proportionate and supported by strengthened local accountability arrangements. Notes to editors Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.
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