Committees

Financial distress in local authorities – Levelling Up Committee inquiry questions finance experts and council finance officers

9 November 2023

On Monday, the Levelling Up, Housing and Communities (LUHC) Committee questions finance experts, including from the National Audit Office and the Institute of Fiscal Studies, and local authority Chief Financial Officers as part of the Committee’s inquiry on financial distress in local authorities.

Ahead of the Autumn Statement, the cross-party group of MPs are likely to question witnesses on the issue of increasing demands on local services and examine the main spending pressures on councils.

The committee are likely to explore issues including local government funding and spending, the role of central government, and financial management at councils.

In the wake of the recent issuing of a section 114 notice to Birmingham city council, the Committee is also likely to examine issues around financial oversight, control and scrutiny.
For more information on the inquiry, see the full terms of reference which are listed further below (below the witness details for Monday’s evidence session).

Witnesses

From 16.00

  • David Phillips, Associate Director, Institute for Fiscal Studies
  • Jonathan Carr-West, Chief Executive, Local Government Information Unit
  • Abdool Kara, Executive Director, National Audit Office
  • Paul Dossett, Partner and Head of Public Sector Assurance London & South-East, Grant Thornton

From 17.00

  • Lorna Baxter, Section 151 officer, Oxfordshire County Council
  • Bob Watson, Section 151 officer, Surrey Heath Borough Council
  • Steve Thompson, Section 151 officer, Blackpool Council
  • Gary Fielding, Section 151 officer, North Yorkshire Council

Financial distress in local authorities – inquiry terms of reference

Local authorities’ financial resilience – the current position

  • Why are local authorities in financial distress?
  • What is the extent of the problem?
  • Was the problem predictable?
  • To what extent are common system-wide issues identifiable?
  • What makes some local authorities more resilient than others?
  • Does size and location impact on financial resilience?

Local authorities’ financial management and governance

  • How do local authorities attempt to match their funding against demand for public services?
  • How is funding split between local taxation, central Government grants, fees and charges, borrowing, returns on commercial investments, and reserves? Has this balance changed recently?
  • Has the level of demand for local authorities’ services changed recently? If so, in which specific areas and why?
  • Which local authority services have the greatest impacts on budgets? How do local authorities maintain effective financial oversight, control, and scrutiny?
  • What mechanisms exist, is there access to reliable and timely information, and sufficient skills and expertise?

The role of the Department

  • Is the overall accountability framework, for which the Department for Levelling-up, Housing and Communities is responsible, operating effectively?
  • How well are the early warning systems at the national level functioning?
  • What data are, or should be, provided by the Government on the financial health of the system?
  • What role will the new Office for Local Government (OFLOG) play in this framework?
  • Are the codes and statutory guidance sufficiently accessible and clear? How is adherence monitored and what are the consequences of non-compliance?
  • How well does the Government understand the consequences of funding and statutory service decisions?
  • What can the Government do to address the drivers of financial distress, and to support those currently in distress?

Further information

Image credit: Elspeth Keep/UK Parliament