England & Wales Press Releases

LGIU response: Commons LUHC Committee report on financial distress in local authorities

LGIU response: Commons LUHC Committee report on financial distress in local authorities
Four solutions for the future

Today’s report on financial distress in local authorities from the House of Commons Levelling Up, Housing and Communities Committee, recognises and amplifies the cries of anguish from local authorities across England who have been struggling for years due to a lack of funding, rising need (adult and children’s social care, homelessness, and SEND services) and increasing costs. The Committee’s report includes evidence and research from the LGIU’s Local Democracy Research Centre following oral evidence from Chief Executive, Jonathan Carr-West.

LGIU’s latest research published today in partnership with experts from the University of Northumbria reinforces the Committee’s report and outlines examples of international best practice and the practical steps necessary to solve the crisis in local government funding. Sharing surplus funds between wealthier and more deprived councils while allocating central government funding to areas based on need rather than bidding are two of four low-cost solutions to the local government funding crisis, proposed in Learning from local government finance across the world.

With local government’s structural finance problems now well-understood (seven councils have declared themselves effectively bankrupt since 2020), the LGIU has focused on solutions from around the world and identified four interventions that could immediately improve essential services for residents (full detail below).

The 2024 State of Local Government Finance report will be published on Wednesday 28 February detailing the financial pressure that councils are facing from the perspective of those responsible for council finances. The LGIU has been conducting this survey since 2012. The 2023 edition of the report can be found here.

Jonathan Carr-West, Chief Executive, LGIU, said: “Today’s report from the Commons LUHC Committee is another clear indication of just how broken local authority funding is. With local councils burning through their financial reserves to avoid going bankrupt and a general election on the horizon, it has never been more important to establish and promote improvements to the local government finance system that, crucially, don’t add more pressures on the taxpayer.

“The four proposals outlined in our latest research today have been shown to be effective in countries such as Japan, Italy and Germany, helping create a sustainable and resilient system without burdening the taxpayer and there is no reason they could not improve public services for Britons – if they were given a shot”.

Dr Kevin Muldoon-Smith, Associate Professor at Northumbria University, said:  “After analysing the international locations it became evident that England is a real outlier in terms of the structure, regulation, funding, and distribution of local government finance. The proposals in this report indicate how international best practice can be taken forward to help turn around the fortunes of local government finance in England.”