1Introduction
1.The last three Spending Reviews have seen significant cuts in the support central government has provided to local government. The 2010 Spending Review set out real-terms cuts of 27% in the then Department for Communities and Local Government’s budget for local government over the four years to 2014–15.1 This was one of the largest cuts set out in the 2010 Spending Review. Other large departmental budgets had much lower real-term reductions, such as Education and Defence, or no real-term reduction, as was the case with Health. Further significant reductions in central government support for local government were set out in Spending Round 2013 and the 2015 Spending Review.2 It is with this in mind that we decided to conduct an inquiry on local government finance in England in advance of the forthcoming Spending Review.
2.Our inquiry considered four key areas:
- The effects of changes in local government funding on local government services;
- The efficiency, fitness for purpose and sustainability of the current system for funding local government;
- The assessment of local government funding needs;
- The approach the Government should take to the forthcoming Spending Review.
3.The local government finance system is complex, and the challenges that local authorities face inevitably vary from place to place. The structure of local government across England is not uniform and over the last 10 years there have been changes to how local government is financed, most importantly the move to increased business rate retention. The Ministry of Housing, Communities and Local Government (MHCLG) is also currently undertaking a Fair Funding Review to assess the relative needs and resources of local authorities.
4.We have been not been able to look at all the many and varied local government finance issues in detail and there are other important topics (for example capital investment in infrastructure and the local government pension scheme) which we have not been able to cover at all. Instead we have aimed to produce a report in timely fashion that can inform the work that the MHCLG and HM Treasury are doing to set budgets and allocations for 2020 and beyond. The Minister for Local Government said that he was still presuming that a multi-year Spending Review would take place in 2019. However, others have said it is likely that it will be postponed. Nevertheless, central government must set out budgets for 2020–21 by the end of 2019.
5.We thank everyone who has contributed to our inquiry. We received over 100 written submissions from local authorities (and grouping of authorities), think-tanks, academics and others with expertise and insight into local government finance. We also had 3 evidence sessions where we heard from 15 witnesses including Rishi Sunak MP, the Minister for Local Government. Finally, we thank our Specialist Advisor, Professor Tony Travers.
1 HM Treasury, Spending Review 2010, p10, table 1
2 HM Treasury, Spending Round 2013 and Spending Review and Autumn Statement 2015
Published: 21 August 2019