House of Commons Library

Local authority financial resilience

Published Monday, March 11, 2019

A Commons Library briefing on the financial resilience of local authorities: debates during the 2010s

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This briefing paper summarises concerns around local authority financial resilience, which have risen in profile in the late 2010s. It gives brief details of the legal accountability structures faced by local authorities, and of the process that they must follow when developing their annual budgets, including the role of the head of finance (the ‘section 151 officer’) and the procedure surrounding the issue of ‘section 114 reports’ within local authorities.

The paper provides details of concerns expressed by the local government sector in recent years regarding the future funding of local authorities. These include the LGA’s ‘Future Funding Outlook’ reports, and debates concerning whether English local authorities collectively have access to sufficient funding to continue to discharge their functions. It also provides some details of the high-profile difficulties experienced by Northamptonshire County Council in 2018, and of media reports of financial difficulties in other local authorities since then.

The paper provides details of the Local Government Association’s peer challenge system, and the monitoring framework for local authorities operated by the Ministry of Housing, Communities and Local Government (MHCLG). Lastly, it summarises debate around the 2018 proposals from CIPFA (the Chartered Institute of Public Finance and Accountability) for a ‘financial resilience index’. This proposed to use a number of finance-related indicators to create a high-level measure of the financial resilience of all local authorities in England.

Local government is devolved to Scotland, Wales and Northern Ireland. Local authorities in those areas have not been subject to the level of funding reductions that their counterparts in England have faced since 2010. Accordingly, debates about local authorities’ financial resilience have focused principally on England, and this briefing paper therefore principally covers England.

This briefing paper summarises concerns around local authority financial resilience, which have risen in profile in the late 2010s. It gives brief details of the legal accountability structures faced by local authorities, and of the process that they must follow when developing their annual budgets, including the role of the head of finance (the ‘section 151 officer’) and the procedure surrounding the issue of ‘section 114 reports’ within local authorities.

The paper provides details of concerns expressed by the local government sector in recent years regarding the future funding of local authorities. These include the LGA’s ‘Future Funding Outlook’ reports, and debates concerning whether English local authorities collectively have access to sufficient funding to continue to discharge their functions. It also provides some details of the high-profile difficulties experienced by Northamptonshire County Council in 2018, and of media reports of financial difficulties in other local authorities since then.

The paper provides details of the Local Government Association’s peer challenge system, and the monitoring framework for local authorities operated by the Ministry of Housing, Communities and Local Government (MHCLG). Lastly, it summarises debate around the 2018 proposals from CIPFA (the Chartered Institute of Public Finance and Accountability) for a ‘financial resilience index’. This proposed to use a number of finance-related indicators to create a high-level measure of the financial resilience of all local authorities in England.

Local government is devolved to Scotland, Wales and Northern Ireland. Local authorities in those areas have not been subject to the level of funding reductions that their counterparts in England have faced since 2010. Accordingly, debates about local authorities’ financial resilience have focused principally on England, and this briefing paper therefore principally covers England.

Commons Briefing papers CBP-8520

Author: Mark Sandford

Topics: Local government, Public administration

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