England & Wales Democracy, devolution and governance , Finance

National Audit Office – Financial sustainability of local authorities

Summary

The National Audit Office (NAO) has published a report (“Financial sustainability of local authorities”) which examines central government’s approach to local authority funding, and which reviews the sector’s financial sustainability.

They concluded that so far local authorities have generally been able to absorb central government funding reductions. But found evidence that some service levels are reducing and more local authorities are facing the challenge of avoiding financial difficulties while meeting their statutory responsibilities.

The NAO warn that the risk of financial instability will not manifest itself evenly across the sector, advising the Department for Communities and Local Government that it needs arrangements to detect where risks will emerge.

They also found that while there may be opportunities for individual local authorities, changes in the sector’s funding will increase financial uncertainty. So central government must satisfy itself that it understands the cumulative impact of these changes and can make informed decisions about the funding required for local authority services.

This briefing will be of interest to executive members, cabinet portfolio members and senior officers with responsibilities for finance.

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