Financial sustainability of Local Authorities: Chair's statement

30 January 2013

 A statement from The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts:

Local authorities face deep cuts between now and 2015. Many have rationed services, such as adult social care and libraries, and local auditors found an estimated 9 per cent of authorities suffered “high financial stress” in 2011-12.

I am alarmed to hear that 12 per cent are now at risk of being unable to balance their books in the future, according to local auditors, with potentially disastrous consequences. The Government’s initial plan to cut authorities’ central government funding by 26 per cent over the four years to 2015 has been loaded with additional cuts of £445 million for 2014-15. Council tax receipts are now expected to be lower and inflation higher than the Government initially thought, further tightening the squeeze. This is set against a rising tide of demand for services such as adult social care and children’s services. Authorities will have to search harder and wider for future savings, as quick-win cost reductions have already been harvested from services representing a small proportion of their overall spending. This will need to be done without closing the door to people who rely on these services in their communities, particularly the most vulnerable.

I find it extraordinary that the Government has failed to publish a revised figure for the total reduction of local authority income over the spending review period. The Government’s lack of transparency leaves individual authorities and the public in the dark about the true extent of the cuts that still await their communities. This report estimates that the £4.6 billion savings expected to be achieved by authorities by April 2013 are likely to represent just half of the total required.

As the cuts kick in, the Department needs to make clear what it will do if multiple authorities fail financially. In addition, my committee will expect the Department to provide us with a clear statement on the financial impact of the Government’s changes to authorities’ funding and income and what this might mean for local services.

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