‘MULTIPLE local authorities’ are facing financial collapse due to government spending cuts, MPs on the House of Commons Public Accounts Committee (PAC) have warned.
The committee’s latest report, published yesterday, says ministers should be drawing up contingency plans to cope with councils in difficulty.
The central government grant to local authorities is being cut by £7.6bn, or 26 per cent, in real terms between 2011 and 2015, as part of the effort to reduce the budget deficit.
The MPs warn that the worst-affected authorities, often in poor areas, may be be unable to meet their statutory requirements.
PAC chairwoman, Labour MP Margaret Hodge, said: ‘Individual councils are seeing very different levels of funding reductions.
‘For some, the cash they spend on services has been reduced by about one per cent in 2012-13. Others have had the maximum reduction of nearly nine per cent.
‘The more grant-dependent local authorities are suffering the highest reductions in spending power. But these are the very councils which serve poorer and more vulnerable communities whose need for services is the greatest.
‘This raises the spectre of the worst-affected councils being unable to meet their statutory obligations.’
Plans to allow councils to keep some of the business rates they collect would only reward those in commercially successful areas, adding to discrepancies, the committee said.
The MPs warn there is a risk of some authorities becoming financially unsustainable, citing the example of West Somerset Council, recently deemed ‘not viable’ by the Local Government Association.
Hodge added: ‘Central government is cutting funding to local authorities by more than a quarter over four years but does not properly understand what the overall impact will be on local services.
‘Departments have provided some information on possible impacts but it was superficial and incomplete.’
The PAC report says that the Department for Education had ‘failed to provide a proper cost analysis’ of how funding reductions would affect children’s services.
There is clearly disaster immediately ahead.