Over part of English councils face insolvency below £5bn deficit, MPs warn

Councils in England face being beaten via billions of kilos in money owed and reforms which can be divorced from truth, in keeping with an influential committee of MPs.

In its inquiry into native govt funds, the general public accounts committee (PAC) instructed the Treasury and different departments to urgently deal with the estimated £5bn deficit on prime wishes spending – principally on particular tutorial wishes – that may hit council steadiness sheets on the finish of the monetary 12 months, doubtlessly using many bancrupt.

Sir Geoffrey Clifton-Brown, the PAC’s chair, mentioned: “Our inquiry heard that the government is concerned about local authority finances. But the lack of urgent action to come forward with a plan to address the fast-approaching cliff edge for under-pressure authorities would seem to suggest it is comfortable with the current state of affairs as normalised background noise.

“Alarmingly, scrutiny of council finances can now provoke a sense of deja vu, with the same unfixed issues seen over and over.”

Since 2021 councils had been ready to stay prime wishes deficits off their steadiness sheets via a “statutory override” granted via the former govt. But the accounting manoeuvre expires in March 2026, the top of the present monetary 12 months.

The inquiry mentioned that the Ministry of Housing, Communities and Local Government, the Treasury and the Department for Education “should work together to set out their solution for ensuring local authorities can achieve a sustainable financial position when the statutory override ends in March 2026. The solution must include how cumulative deficits will be treated.”

Louise Gittins, chair of the Local Government Association, which represents councils, mentioned: “We expect the government to provide urgent clarity on how it plans to address high needs deficits, which are projected to rise to £5bn next year, as part of its forthcoming special educational needs and disabilities reforms.

“Over half of councils have warned us they will become insolvent next year when the statutory override flexibility ends and we continue to urge the government to write off these deficits.”

The committee additionally accused the federal government of constructing “significant uncertainty” over a string of promised reforms and reorganisations, together with for investment, particular wishes provision and social care.

Clifton-Brown mentioned: “Aspirations for wide-ranging reforms seem to be unengaged with a reality in which local authorities do not have good and strong capacity to fundamentally change the way they work.”

But Jim McMahon, minister of state for native govt, mentioned: “These claims are not supported by the evidence. From a standing start we have set out a clear plan to fix the foundations of local government and have wasted no time in taking action as part of our plan for change.

“We’ve taken action to restore the audit system to a functioning state, recast our approach to council best value and we are laying legislation to bring in a new local audit office.

“The spending review provided over £5bn of new grant funding for local services, and that’s on top of the £69bn we have already injected this year to boost council finances.”

Last week the Guardian reported that council leaders in England say the multibillion pound prime wishes deficits have develop into a “burning platform” that may push rankings of councils out of business inside of months.

Ministers intention to put up a colleges white paper within the autumn, together with reforms to training, well being and care plans, referred to as EHCPs. The plans give kids and younger other people as much as the age of 25 the prison proper to enhance from native government’ prime wishes budgets, for prerequisites similar to autism spectrum dysfunction, consideration deficit hyperactivity dysfunction, and speech, language and communique wishes.