Pandemic risks resulting in reductions in public services
The Public Accounts Committee has warned that the impact of the pandemic risks leading to reductions in services for residents even as council tax rises, and therefore residents could be paying more at a lower price.
MPs on the the committee recognise the government acted effectively to stave off widespread financial failure in local authorities as coronavirus hit. But, the committee concludes, the Ministry of Housing, Communities and native Government’s over optimism about the resilience of local government isn't matched through the reality.
They state that the long-term systemic funding issues in local government means that sector representatives are clear that most councils will not be able to manage solely using reserves.
Furthermore, the committee argues that uncertainty about government funding and support has hindered local authority financial planning for the entire year ahead and been a driver for cost cutting. Longer-term reform of municipality finance has been delayed twice, first by Brexit and now through the pandemic, and reform to adult social care remains undelivered.
When a council fails financially it hits taxpayers and repair users hard. The committee says the federal government must be more transparent about the financial pressure facing the sector and to avert the opportunity of councils effectively going bust.
Meg Hillier, chair from the Public Accounts Committee, said: “The nation's pandemic has thrown up many challenges for local councils, not least that areas of Whitehall didn't always work with them when drawing up national schemes. MHCLG did step-up to prevent a wave of council bankruptcies because of the pandemic however the long-term health from the sector continues to be precarious. The over-optimism concerning the resilience from the sector is extremely concerning. MHCLG must be a better champion for municipality within Whitehall.
“MHCLG’s wherewithal to properly collect or share information means that it had to quickly generate a system to do this. That councils could deliver quickly is really a credit to local finance teams but begs the issue of why it was not in position prior to the pandemic and underlines the committee’s long-standing concerns about the department’s knowledge of the sector’s financial challenges.”
Sharon Taylor, chair of the Municipality Association’s Resources Board, said: “Many councils were in a difficult financial position prior to the pandemic following a decade of central government funding reductions. The committee is appropriate to recognise the government has provided a significant financial package of support to pay for cost pressures and some from the income losses incurred because of Covid-19.
“This support will have to be kept under review and that we still ask government to satisfy – entirely – all cost pressures and income losses incurred by councils as a result of the pandemic.
“Councils continue to face significant demand pressures on day-to-day services and income losses, such as from local taxation, charges and fees. We agree with the committee that the forthcoming Spending Review needs to provide councils having a multi-year settlement that puts municipality funding on a long-term sustainable footing. This will assist them to more proficiently plan how to supply the local services our communities depend on and which have proved so vital during the pandemic.
“Investment in local services is going to be fundamental to our national economic and social recovery. Using the right funding and freedoms, councils can help government achieve its ambitions to level up, drive improvements in public health, boost local economic growth, revive town and city centres, build more homes, fix our roads, improve the life chances of children and young adults, and equip individuals with the skills they have to succeed so nobody is left behind.”
