The chair of parliament’s influential Public Accounts Committee has warned that the government’s proposals for “wholesale local government reorganisation” are a significant risk for a hugely under-pressure part of the public sector.
Sir Geoffrey Clifton-Brown used his first annual report as PAC chair to set out views on the key challenges facing Whitehall, based on the work of his committee – which has a remit to scrutinise the government’s past spending and future plans.
In his wide-ranging report, published today, Clifton-Brown highlights ministers’ proposals to reshape English counties which currently have two-tier local government arrangements into new “unitary” authorities as a “particular concern”.
“Government is embarking on wholesale local government reorganisation at a time when, for a variety of reasons, most local authorities are under significant financial strain,” he said. “Government’s wish to abolish district and borough councils and merge them with county councils to form larger unitary authorities risks turning existing financial problems into far larger ones.”
Clifton-Brown said the threat posed by the LGR plans – kicked off by then-communities secretary Angela Rayner in December 2024’s English Devolution white paper – should not be underestimated.
“The reason this is so important is that local government often provides the services which are closest to and matter most to people, including children and adult social services, roads, and community-based services,” he said.
Clifton-Brown's report draws widely on the PAC’s extensive inquiries. In the case of LGR, it notes the “immense” financial pressures faced by councils because funding has failed to keep pace with population growth, inflation and increased demand for services. Despite that, the committee chair acknowledges recent government announcements about major reforms to funding for local government services.
He also notes the number of councils who have made Section 114 declarations confirming that they are effectively bankrupt, and authorities who have stopped short of that – but have sought exceptional financial assistance.
Clifton-Brown said that the issues faced by councils came against the backdrop of the long-running crisis in local-government audit, which has left many authorities without a solid understanding of the resources they have available.
“It is not clear how government will sequence these reforms, or whether the sector will have the capacity to cope with them all at once,” he said.
“Local government is approaching these extensive reforms from an extremely fragile position, creating significant risks.
“As the formulae to distribute funding based on levels of need have not been updated for many years, any updates to align distribution with current need will lead to huge losses and gains across the local government system.”
Clifton-Brown added that further challenges would include the distribution of deficits and debts between the authorities who ran them up and the new councils being created.
Government’s digital capabilities an ongoing concern
Elsewhere in the report, Clifton-Brown described government‘s readiness to capitalise on the potential of digital transformation and artificial intelligence as “a key issue”.
“I remain unconvinced that government is geared up to harness the benefits of increasing digitalisation at the speed with which it is evolving,” he said. “Digital transformation and AI offer opportunities to increase public sector productivity and improve the quality and value for money of public services.
“However, government has historically found digital transformation challenging, and issues with legacy systems, procurement, skills and governance, and building public trust all stand as barriers to realising these opportunities. The scale and speed of the transformation required is not yet fully appreciated by government, and in a few years’ time, AI will have completely transformed the way we do business. Our country is therefore at real risk of falling well behind the pace of change.”
Funding for defence commitments remains a mystery
Clifton-Brown also said he was “extremely sceptical” that the commitments set out in this year’s Strategic Defence Review are affordable.
He pointed to the government’s pledges to spend greater proportions of gross domestic product on defence, rising from a current 2.2% of GDP to 2.6% by 2027 and 3.0% in the next parliament.
Clifton-Brown said spending would have to rise from the current year’s £62.2bn to £71bn in 2027-28, while the 3.0% commitment would require the defence budget to increase to around £85bn in current prices.
“Given the current fiscal situation, government will need to set out how it plans to finance the enormous increases in the defence budget, and the committee must be allowed to ask the right questions to investigate these sensitive areas,” he said.
Clifton-Brown's full report can be read here.