Councils so overwhelmed by acute issues such as homelessness they cannot plan for the long-term, MPs warn

A backbench committee has warned councils are so overwhelmed by dealing with urgent, acute issues including the demand for temporary accommodation they cannot plan to tackle problems in the long-term.

The Housing, Communities and Local Government Committee, in a report into the funding and sustainability of councils, said temporary accommodation costs “are adding to the unprecedented financial strain facing local authorities across the country”.

It said: “Local authorities spent around £2.29 billion on temporary accommodation in 2023/24, while London boroughs alone spend a combined total of £4 million per day on temporary accommodation.”

It said the demands of urgent services, such as homelessness support, social care and support for children with special educational needs and disabilities, mean they cannot plan long-term to address underlying causes and prevent problems escalating out of control. The demands also make it harder for councils to afford to maintain services such as waste collection, road maintenance and libraries, thereby ‘breaking the link’ between tax and service quality.

The committee said it supports the government’s intention to focus on prevention but warned bolstering preventative services “must not come at the expense of acute services, such as temporary accommodation provision, lacking the funding they need today.”

It said: “While the Government has committed over £1.5 billion to reform these key services so that they are focused on prevention, it must provide further clarity about what these service reforms will involve, how they will be implemented, and how the government will measure whether the reforms have been successful.

“These reforms must necessarily involve close collaboration between the Ministry and other involved departments across government. Preventative services must be supported to reduce overall costs in the long term. The Government is taking steps in the right direction in this area, but it needs to be bold and move quickly.”

It said that the housing benefit subsidy for temporary accommodation subsidy is limited to 90% of the rate of Local Housing Allowance set in 2011 and has therefore not kept up with the rising costs of temporary accommodation.

The report makes several recommendations to overhaul local authority funding, including ensuring central government increases in proportion to the cost of council services. It said the “regressive” council tax should be reformed and replaced and in the meantime councils should give local authorities more control over council tax in their areas. It said this should include the power for individual councils to revalue properties in their area, define property bands, set the rates for those bands, and apply discounts.

It said that council funding is too over-centralised.

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It said: “We recommend that ringfencing of funding be replaced with an outcomes-based system of accountability, under which local authorities will be held accountable for achieving against a set of agreed outcomes within their overall budgets, not for meeting spending targets. Ringfencing and other centralised spending controls should only be used in response to financial mismanagement.”

The report comes as official government figures this week showed the number of households living in temporary accommodation rose 12% to 131,140 in the first quarter of the year.

The government in the spending review announced £950m for a fourth round of a fund to help councils increase temporary accommodation.

The funding for the Local Authority Fund is the largest allocation yet, coming on the back of £500m in the first wave, £250m in round two and £450m in the third round.

The government also announced £100m for early interventions to prevent homelessness, including through the transformation fund.