NAO publishes report on local government financial sustainability

The National Audit Office has published a report looking at financial sustainability in local government.

The report focusses on The Ministry of Housing, Communities & Local Government, (MHCLG) as the department responsible for the framework within which local authorities operate, and which provides transparency over the current position of local government finances.

The report looked at the context of local government finances in 2024; service and financial pressures; and the government’s approach to local government financial sustainability.

It found that funding for local government has increased in recent years, reversing the long-term downward trend of the previous decade. However, while real terms funding has grown by 4 per cent between 2015-16 and 2023-24, it has not kept pace with population growth or the demand for services, the complexity of need, or the cost of delivering services to people most in need of support.

In response to the report, Cllr Pete Marland, chair of the Local Government Association’s Economy and Resources Board, said: “Councils in England face a funding gap of up to £8 billion by 2028/29. While they continue to innovate and transform services to deliver for communities and provide greater value for money, they desperately-need a significant and sustained increase in overall funding in the Spending Review to meet the requirements being placed on them.

“Without adequate funding, councils will continue to struggle to provide crucial services – with devastating consequences for those who rely on them - and it will be impossible for them to help the Government achieve its reform and growth agenda.

“The NAO rightly highlights that funding pressures are being exacerbated by a lack of reform which has weakened the financial sustainability of councils and left them with a complex, outdated funding system. Creating an improved and a more sustainable funding system for local government is also critical to strengthen the value for money of local spending and, most importantly, improve services for communities.”