The Government must fix the £4bn hole in council funding
arrangements for 2024-25 or risk severe impact to council
services and the prospect of further councils in England facing
effective bankruptcy, says the cross-party Levelling Up,
Housing and Communities (LUHC) Committeein a report
published today (Thursday).
The Financial Distress in Local Authorities
report points to a systemic underfunding of local councils in
England and calls on the next Government to reform council tax,
and the wider funding system for local authorities, to ensure
council finances are put on a sustainable footing.
The report identifies the range of financial pressures currently
faced by councils in England, not least the rising demand for
children’s and adults’ social care which are contributing to
unmanageable bills for some local authorities.
The report highlights the costs involved in the delivery of
services for children and young people with special educational
needs and disabilities (SEND) and home-to-school transport. The
report calls for the Government to commit to a full review of the
Education, Health and Care (EHC) plan system and to consider
reforms to make SEND provision financially sustainable and ensure
that all children and young people with SEND have access to the
services that they need.
, Chair of the Levelling
Up, Housing and
Communities (LUHC) Committee, said: “There is
an out-of-control financial crisis in local councils across
England. Councils are hit by a double harm of increased demands
for services while experiencing a significant hit to their
real-terms spending power in recent years. Increasing demands on
council services such as social care and special educational
needs and disabilities (SEND) provision has resulted in rocketing
costs but the levels of funding available to councils has failed
to keep track.
“The Government must use the local government financial
settlement to help bridge the £4bn funding gap for 2024-25 or
risk already strained council services becoming stretched to
breaking point. If the Government fails to plug this gap,
well-run councils could face the very real prospect of
effectively going bust.”
“Long-term reform is vitally needed. The funding model for local
councils is broken. The business rates system is overly complex
and in need of reform. Council tax is outdated and increasingly
regressive. Councils being forced to hike up council tax, in a
forlorn attempt to plug increasingly large holes in their
budgets, is unsustainable and unfair to local people who are,
year on year, seeing less services while paying more.”
The report calls for the next Government to embark on a
fundamental review of the system of local authority funding and
local taxation, exploring all options for removing its current
regressive elements and considering options including land value
taxes and wider fiscal devolution measures.
On adult social care, the Committee reiterates the call from its
July 2022 report on the Long-term Funding of Social Care
to urgently allocate more funding to local authorities in the
order of several billions each year.
The report draws attention to increasing levels of homelessness
which have required local authorities to spend more in fulfilling
their responsibilities to those requiring support. The
Committee’s report say that a key driver of increased
homelessness is the Government’s decision to freeze local housing
allowance (LHA) rates at April 2020 levels. The Committee
welcomes the Government’s recent announcement that it will
increase LHA rates from April 2024, but urges the Government not
to subsequently re-freeze LHA rates and instead to maintain them
at least at the 30th percentile of local market rents each year.
In the Committee’s 2020 Report Building More Social
Housing, the Committee recommended that a social
housebuilding programme should be top of the Government's agenda.
ENDS
Further information
The report summary is on p3. A list of the report’s conclusions
and recommendations can be found on p.42. A list of the public
evidence sessions for this inquiry (and links to the transcripts
in each case) can be found on p.48 of the report.
The report news-item will
be available on the Committee website (the link is embargoed
until 0001 Thursday).
