Be more transparent over new burdens on councils, NAO tells Whitehall

Whitehall departments must assess new burdens on local authorities “not only rigorously but also transparently” to ensure local authorities perceive the process as fair, the National Audit Office has said.

In a report on the application of the so-called ‘New Burdens Doctrine’, Local government new burdens, the spending watchdog urged departments to test their assessments after new burdens are implemented to make sure that funding is appropriate.

This was particularly needed when assessments contained significant uncertainty, it suggested.

The NAO also called on the Department for Communities and Local Government to be more open about which burdens are assessed and the outcome of assessments, and promote reviews of assessments after new burdens are introduced.

The DCLG must in general improve its understanding of the pressures affecting local authorities’ financial sustainability and consider the cumulative impact of new burdens that are small, it said.

The Doctrine – reaffirmed by the coalition in 2011– sets out how the Government will ensure that new requirements that increase local authorities’ spending or reduced their income do not lead to excessive council tax increases.

It commits the Government to assess and fund extra costs for local authorities from introducing new powers, duties and other government-initiated changes. A failure to apply the Doctrine properly would mean local authorities have to meet additional costs.

The key findings in the NAO report in relation to the DCLG were:

• The Department has effective ways to find out about potential new burdens;
• The DCLG scrutinises policy changes which could potentially be new burdens and takes a proportionate approach to decide which of these departments should assess fully;
• Although it has no reason not to, the Department does not publish routinely details of potential new burdens it considers or assessments done. This lack of transparency undermines the Department’s efforts to consult with the local government sector and creates uncertainty for local authorities;
• The DCLG provides guidance and support for assessments, which departments have welcomed, but it could challenge other departments more. The NAO identified cases where more scrutiny by the Department of costs “would have been desirable to reduce the risk of underfunding authorities”;
• The Department has not encouraged departments to review their assessments and has no method to capture and share learning. “Departments should review uncertain assessments after introducing changes to ensure local authorities get the right funding. The guidance says the Department will select up to 6 assessments for independent post-implementation review each year, and discuss with departments their approaches to doing assessments. We found no reviews or learning had taken place since 2009”;
• Inadequate information systems limit how well the Department uses intelligence from the new burdens regime to understand local government pressures, but this is improving.

The key findings in the NAO report in relation to Government departments were:

• Departments take the cost assessment process seriously but have struggled in some cases to get reliable cost data from local authorities;
• Departments rarely outline explicitly the uncertainty of cost estimates in their assessments, even where this is high;
• Some departments’ approaches for calculating costs created risks that new burdens would be under- or over-funded;
• Departments have consulted well with local authorities, using different methods;
• Departments’ new burdens funding to local authorities is not always transparent and can be reduced quickly, resulting in concerns about underfunding;
• There is little evidence of departments reviewing new burden assessments after introducing new requirements.

Amyas Morse, head of the National Audit Office, said: “The Department for Communities and Local Government has taken steps since November 2014 to improve its understanding of new burdens on local authorities.

“But it needs to use intelligence from the new burdens regime to improve its understanding of the pressures affecting authorities’ financial sustainability.”

The NAO report includes case studies on the following potential new burdens:

• Changes to statutory guidance under section 182 of the Licensing Act 2003 (Home Office);
• Introducing a right to free early education for disadvantaged 2-year-olds (Department for Education);
• Transferring funding for local welfare assistance (Department for Work & Pensions);
• Requiring authorities to comply with some parts of the Local Government Transparency Code (Department for Communities and Local Government);
• New duties in 2015-16 introduced by the Care Act (Department of Health);
• Transferring the Local Land Charges register from local authorities to HM Land Registry (HM Land Registry).

A copy of the report can be viewed here.

Responding to the National Audit Office report, Cllr Claire Kober, chair of the Local Government Association's Resources Board, said: "In recent years, local government has worked hard to save billions while protecting services for residents and have proved to be effective at implementing new government policies.

"As this report rightly recognises, it is wrong for councils to have to reduce spending on vital services, such as caring for the elderly, collecting bins and fixing our roads, to meet the costs brought about by changes to national policy.

"Funding for recent new burdens, such as the increase in Deprivation of Liberty Assessments and the new Local Government Transparency Code, was not received by councils before they incurred new costs. This has added significant pressure on local services.

"The NAO's helpful recommendations would improve the new burdens process and address the lack of transparency which has been a source of frustration among local authorities. We would urge the Government to go further and ensure new burdens are properly assessed and paid to councils before they incur any new costs in order to avoid other local services suffering as a result."