Ministers are “in denial” over the “perilous” state town hall finances have been left in following eight years of austerity, MPs have said.
The Public Accounts Committee (PAC) has investigated how English councils have coped with their budgets being almost halved by Whitehall since 2010.
The powerful cross-party group found under-pressure town hall chiefs forced to overspend just to keep essential services going.
Meanwhile demand for services is peaking, with homelessness having doubled and the rate of looked-after children at a 25-year high.
Committee chair Meg Hillier slammed “quick fixes” by Westminster which showed “an unacceptable lack of ambition” by ministers to give councils a sustainable future.
The government announced a £1.4bn cash injection in the budget in October but the PAC said, with half due to be spent by the end of the current financial year, it was unclear how the government would spend the cash.
“Some councils are now in an extremely worrying position: overspending their budgets for social care, reducing key services, falling back on financial reserves and increasingly relying on generating other sources of income, which comes with greater risks,” the committee said.
“The Government has had to inject large amounts of additional funding to ensure that the local authority sector can keep going in the short-term: £1.4 billion in the 2018 budget.
“Yet disturbingly, there is still no sign that the department has a clear plan to secure the financial sustainability of local authorities in the long-term.”
The committee said the Ministry of Housing Communities and Local Government had shown “an unacceptable lack of ambition” for the sector with no aspiration for local government finances beyond “merely coping”.
MPs said they were “deeply dismayed” the MHCLG seemed to view the issue in terms of a small set of statutory services authorities are required to provide by law - predominantly social care - rather than the full range of services residents expect from their council.
“There are a range of other services, such as libraries and youth services, which local people can reasonably expect their council to provide, but which the department does not consider rigorously when determining whether local authorities are financially sustainable,” it said.
“We are concerned that the department’s narrow view of service provision risks giving a misleading picture of the sustainability of services as a whole.”
Hillier added: “The government is in denial about the perilous state of local finances. It insists the sector is sustainable yet is unwilling or unable to back up this claim. Flimsy assertions have no place in financial planning.
“Government needs to get real, listen fully to the concerns of local government and take a hard look at the real impact funding reductions have on local services. And then it needs to plan properly for the long-term.”
Pressures continue to grow in children’s services, adult social care, and efforts to tackle homelessness and this is leaving increasingly less money for councils to fund other discretionary services, such as the maintenance of parks, certain bus services, cultural activities and council tax support for those in financial difficulty - to plug growing funding gaps.Richard Watts, chair of the Local Government Association’s Resources Board
Communities Secretary James Brokenshire said the current settlement would pave the way for “a fairer, more self-sufficient and resilient future” for local government.
“That is why local authorities will have more control over the money they raise and a real terms increase in their core spending power,” he said.
“The settlement also recognises the pressures councils face in meeting growing demand for services and rewards their impressive efforts to drive efficiencies and rebuild our economy.”
But reacting to the report, Richard Watts, chair of the Local Government Association’s Resources Board, said councils were crippled by cash shortages.
He said: “Pressures continue to grow in children’s services, adult social care, and efforts to tackle homelessness and this is leaving increasingly less money for councils to fund other discretionary services, such as the maintenance of parks, certain bus services, cultural activities and council tax support for those in financial difficulty - to plug growing funding gaps.
“Fully funding councils is the only way to ensure councils can continue to provide all of the valued local services which make such a positive difference to communities and people’s lives.”
Andrew Gwynne, Labour’s shadow communities and local government secretary, said the report “exposes a human and financial crisis of the Tories’ own making”.
He said: “Local government is under enormous pressure because of politically motivated cuts that have hit our poorest areas hardest. Nine of the ten most deprived councils in the country have seen cuts of almost three times the national average. And when you cut vital support services in such areas, social problems grow – and demand for those services only becomes greater.”