“Local Government Financial Sustainability”
Local government is under extreme financial pressure. The National Audit Office found in 2021 that English local authorities had lost around a quarter of their spending power over the preceding decade, with government-funded spending power over 50% lower.
While a £4.5bn funding increase was provided to local authorities in 2024-25 by Government as compared to 2023-24, councils continue to experience rising costs and increased demand across a whole range of services.
The PAC’s 2022 report on the local government finance system warned of a chronic lack of accountability and transparency in the system which would hamper recovery from the COVID-19 pandemic.
It highlighted the real risk that much-heralded extra funding in the 2021 spending review would only allow local government to stand still, rather than addressing the significant service pressures and risks built up over the decade.
The NAO’s 2025 overview report looked at what local government in England spends, how this spending is funded and the effect of changes in recent years, with the aim of enhancing financial transparency in the sector.
Based on the NAO report, the PAC will hear from senior officials from the Ministry of Housing, Communities and Local Government (MHCLG) and HM Treasury on subjects including:
- Drivers of financial distress for local authorities, including adult and children’s social care, temporary accommodation, and special educational needs and disability services for children and young people;
- Challenges and support for individuals in accessing local authority services; and
- Support for financially failing local authorities and action to tackle systemic issues.
It will explore how much control local authorities have over their own finances and whether this is enough to achieve financial sustainability.
Written evidence from the cross-party Management Committee of SEC said:
“SEC has long campaigned for Government to address the ultimate issue of local government finance through reform that brings powers closest to residents through their local Councillors, who are closest to their local areas.
It is vital that, whatever form of reorganisation and devolution soon takes shape, that the fundamental principle of local government financial sustainability remains at the forefront…
Councils across the South East stand ready to play their part in the Government’s growth agenda…
Local government financial sustainability can be improved if Government take meaningful steps to address the ultimate issue of local government finance.”
Our full response to this inquiry can be accessed here.
