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The Housing, Communities and Local Government Committee has launched a new inquiry to examine the financial health of local authorities in England and the Section 114 regime.

• Inquiry: Local Authority Financial Sustainability and the Section 114 Regime
• Housing, Communities and Local Government Committee

Section 114 notices are the mechanism through which local authorities report that they are unlikely to achieve a balanced budget for the financial year.

In November, Croydon Council became the first council to issue a notice this year due to severe ongoing financial challenges and potential budget shortfall of £66 million.

It is feared that other local authorities in England are in a similar position due to the additional challenges of the Covid-19 pandemic on already stretched resources. There are also fears that the commercial and investment strategies of some local authorities have caused further difficulties.

The inquiry will assess the scale and depth of financial sustainability issues within local authorities and the likelihood of further Section 114 notices. It will also examine the effect of commercial investments, the impact of Covid-19 and the role of central government in avoiding negative outcomes.

Chair's comments

Clive Betts yesterday said:

“We have launched this inquiry to understand how grave the financial situation for local authorities is at the present time. Will Croydon Council’s issuance of a Section 114 notice prove to be a one-off or the first of many, and what are the common causes of such issues should they prove to be widespread. We will also be looking at the quality of central government support for local authorities who find themselves in financial difficulties and what more can be done to help them.”

Terms of reference

The Housing, Communities and Local Government Committee wants to hear your views. It welcomes submissions from anyone with answers to the questions in the terms of reference. More information about how to submit evidence is available on the inquiry page.

The Committee invites submissions on the scale and depth of financial sustainability issues within local authorities with the potential to lead to the issuing of S114 notices, including the effect of commercial investments and the impact of Covid-19, and the role of central government in helping councils avoid this outcome.

In considering this question, submitters may wish to address:

• Those issues likely to cause impact the financial sustainability of local authorities, specifically structural funding issues (including grant funding), commercial investment decisions and the impact of Covid-19;
• The scale of the problem, including assessment of CIPFA’s resilience index;
• The role of MHCLG, including oversight of the Prudential Framework, capitalisation and reform of the Public Works Loan Board (PWLB);
• What measures could help to stop, or reduce the number of, further S114 notices being issued.

Further information

• About Parliament: Select committees
• Visiting Parliament: Watch committees