THE government is “flying blind” on struggling council finances amid an unprecedented local audit crisis, the public accounts committee (PAC) has warned.

A new PAC report published today raises concerns that the Ministry of Housing, Communities and Local Government (MHCLG) is unable to effectively monitor worsening local authority finances.

It said that this is due to a local audit crisis whereby only 10 per cent of 426 English local authorities submitted reliable data for 2022/23, which led to the National Audit Office being unable to sign off the Whole of Government Accounts (WGA) for that year for the first time ever.

The overall impact of the missing data is estimated as net income being overstated in the WGA by £34.4bn, and net debt overstated by £31.7bn.

The committee has warned that government accounts are not focused sufficiently on long-term financial risks posed by climate change, rising health spending, and geopolitical tensions.

PAC chairman Sir Geoffrey Clifton-Brown said: “The Whole of Government Accounts should provide an accurate picture of the UK’s public finances for Parliament and the wider public.

“But for the first time in the WGA’s history, the National Audit Office has been unable to sign them off.

“The unreliability of its data hinders transparency for the taxpayer’s pound, and it is currently wide of the mark in its assessment of net debt and income by tens of billions of pounds.

“The government told our inquiry that it is confident it still has oversight of the local government finance landscape even without fully audited accounts, from the informal conversations it holds with councils and other sources.

“But the UK faces extreme uncertainty, both in the domestic fiscal situation and the foreign geopolitical situation.

“To tackle this uncertainty with confidence, it becomes all the more important for the government to act to bring the WGA fully up to date as a basis for accurate and sound decision-making as soon as possible.” 

The PAC is calling on the government to set out within six months how it will reduce the levels of missing data within the WGA in future years, noting uncertainties around current plans to try and fix the crisis in local authority audit arrangements.

The MHCLG has been contacted for comment.