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Labour Wants "Proper Accountability And Oversight" Of Council Finance

Angela Rayner at Labour Party Conference (Alamy)

4 min read

Deputy Labour leader Angela Rayner has said that there “has to be proper accountability and oversight” when it comes to local government finance, as Labour is understood to be considering whether the system could be overhauled.

A number of councils have recently found themselves in financial crises as spending pressures in areas such as social care and supporting people in accommodation have continued to rise. 

Last month, Rayner told The Guardian that she is “absolutely worried” about the prospect of more councils going under in the coming years, after Birmingham City Council and Nottingham City Council were among those authorities to issue Section 114 notices last year, declaring themselves effectively bankrupt. 

Now, PoliticsHome understands that Labour is keen to introduce more oversight to the council spending if they are voted into government at the next election, which must be called before the end of this year. 

There is a sense among officials that accountability structures when it comes to local council spending have to be brought up to date. The Audit Commission which was established in the 1980s, originally to appoint auditors to local authorities in England and Wales, was formally closed in 2015. While it is recognised that the body was ineffective in places, there is understood to be concern within Labour that there has not been an effective replacement structure introduced. 

Rayner, Labour’s shadow secretary of state responsible for the local government brief, is critical of what she believes to be a lack of scrutiny at a time when council budgets are under particular strain. 

“Over the last decade, the Conservatives have ripped away any financial oversight of local council spending, scrapping the Audit Commission and pushing councils to borrow more and more," she told PoliticsHome

"This reckless approach has left the government blind to ongoing financial difficulties across the country, with no early warning system in place to sound the alarm when a council is struggling. England’s councils spend more than £100 billion a year and there has to be proper accountability and oversight – without fear or favour.

“Under a Labour Government, we will unlock long-term funding settlements for local leaders, providing them with greater certainty and the ability to plan for the long-term. That’s the virtuous circle that can get councils back on their feet.”

But a government source accused Labour of "breathtaking hypocrisy" and said that mismanagement had contributed to financial woes in one of the councils that issued a Section 114 last year, drawing particular attention to Labour-run Birmingham City Council, which has recently declared bankruptcy. 

"There are eye-watering levels of debt and wasteful spending," they said. "Inevitably Labour will have to seek to hike taxes on local people to pay for their failings. This is a flashing red warning sign for what a Labour government would do to the UK. More spending, more borrowing, more debt and higher taxes. Taking us back to square one."

Last month, Secretary of State Michael Gove promised more money for councils, including £500m of new funding for councils with child and adult social care responsibilities, ahead of the local government financial settlement for 2024/25 being finalised on Monday. 

Confirming the final local government finance settlement on Monday, Gove said that the provision will help communities “prepare for the future”. 

“This settlement, and the changes we have made to address concerns raised through the consultation, will provide local authorities with the tools to support their local communities, continue to reform their services for the long-term, and to help communities prepare for the future,” he said.  

Last summer, the Public Accounts Committee described the backlog of audited accounts as “unacceptably high” and warned that the situation “may get worse before it gets better”. 

Publishing a report last June, the cross-party committee of MPs said that the backlog of unpublished audits had risen to 632 for the 2021-22 year. 

“The timeliness of local auditor reporting is crucial for making decisions about budgets for local government bodies in England,” they said in their report. 

Shadow policy teams have been working on proposals for the party’s election manifesto. 

The Financial Times reported last month that officials had been given a deadline of 8 February, later this week, to finalise a draft of the key campaign document. 

 A spokesperson for the Department for Levelling Up, Housing and Communities said: “We have announced more than £64 billion to bolster council budgets and ensure they can continue to deliver frontline services.

“Councils are ultimately responsible for their own finances, but we are very clear they should not put taxpayers' money at risk by taking on excessive debt.

“We are taking action to prevent this, and the Levelling Up and Regeneration Act provides new powers for central government to step in when councils take excessive risk with borrowing and investment.”


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