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28.01.15

MPs warn over future threat to council services

Further cuts to council funding could threaten the viability of some statutory services provided by local authorities, a cross-party committee of MPs has warned. 

Launching its latest report, the Public Accounts Committee (PAC) said that over the last five years councils have had to cope with funding reductions of around 37%, but these have not hit all local authorities equally. 

The MPs added that local authorities have, on the whole, responded well to the cuts in funding. But external auditors have “voiced concerns” over whether some councils will continue, over the medium term, to be financially sustainable and be able to make further savings. 

Margaret Hodge MP, chair of the PAC, said: “Councils with the greatest spending needs – the most deprived authorities – have been receiving the largest reductions. Further cuts could not just undermine the entire viability of most optional services, but might threaten some statutory services in these areas. 

“The DCLG has overall responsibility for funding to councils. However, it takes a largely “hands off” approach and does not have a good enough understanding of the impact of funding reductions, either on local authorities’ finances or on services. 

“Looking to the future, if funding reductions were to continue following the next spending review, we question whether the Department would be in a position to provide assurance that all local authorities could maintain the full range of their statutory services.” 

PAC added that it is unclear whether the Department is exercising a cross-government leadership role with respect to local government. 

The Committee’s report ‘Financial sustainability of local authorities 2014’ has recommended that the DCLG should be the single point that is overseeing the implications of government funding reductions and their implications for the delivery of local statutory services. 

But in order to improve its oversight of the financial sustainability of local authorities. DCLG should produce, and update annually, a measure of change in revenue spending power agreed with local authorities which are transparent in showing change over time; and adopt a targeted approach to monitor more closely the financial sustainability of individual local authorities deemed to be at ‘high risk’. 

HM Treasury should also ensure that all relevant departments comply fully with the Department’s requests for information at future spending reviews. The impact assessment should also focus on types of authority in which, because of higher funding reductions coupled with more intense service demand, services are at greater risk of becoming unsustainable. 

PAC added that the Treasury should endeavour to give more “clarity” to local authorities about future funding, so that local authorities can plan their delivery of services going forward.

Graeme McDonald, director of the Society of Local Authority Chief Executives (Solace), said councils were “rapidly approaching breaking point”. 

He said: “This report confirms the immense scale of the financial challenge facing local government. Continued reductions without a coherent plan for public service reform threaten the viability of statutory services. Government must act coherently and understand the cumulative impact of its decisions.”

In response, local government minister Kris Hopkins defended the government’s position saying that it has continued to deliver “a fair settlement to every part of the country - north and south, rural and urban, city and shire - and the truth is that councils have continued to balance their budgets while public satisfaction with services has been maintained”. 

Hopkins did not say whether he supported PAC’s recommendations, adding: “Every bit of the public sector needs to do its bit to pay off deficit left by the last administration, including local government, which accounts for a quarter of all public spending. But so far over this parliament council spending, excluding education, has actually increased in cash terms. 

“Every council should therefore be able to deliver sensible savings while protecting frontline services for local taxpayers and keeping council tax down. This includes tapping into the £21bn of reserves which town halls have been quietly holding back year-on-year.”

(Image: c. Our Creative Talent)

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