Local Government Funding: North-west England

Tuesday 21st October 2025

(1 day, 22 hours ago)

Westminster Hall
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16:02
Tom Morrison Portrait Mr Tom Morrison (Cheadle) (LD)
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I beg to move,

That this House has considered funding for local government in the North West.

It is an honour to serve under your chairship, Mr Turner. I thank the Minister for being here today.

I will start by reading the words of Stuart, who lives in my Cheadle constituency, and who wrote to me just two days ago—a timely admission for this debate. He said:

“I am writing as a resident of Cheadle Hulme to express my deep concern about the level of council tax and the prospect of further increases. My current council tax is £275 per month...This level is already difficult to sustain, and any further rise will make it unmanageable for many working households like mine. I understand that a large proportion of council spending now goes toward adult and children’s social care, but the current trajectory feels unsustainable without fundamental reform or additional central government support.”

Stuart is right: the current situation is completely unsustainable, and I am sure Members here today will agree that it cannot go on.

I am sure we all entered politics to effect change—campaigning to keep a school open, fundraising for a library or creating a community group. We know that change starts small, with one person, one area or one community. We must take to heart the saying that all politics is local. Local government is at the forefront, the most frequent point of interaction between the British public and government. As a former councillor myself, I know the amazing things that local government can achieve and the real and lasting impact it can have on a personal level.

Local governments are the key to unlocking growth, improving health and poverty outcomes, and providing the best support to the most vulnerable. But our local authorities, as Stuart rightly points out, are suffering tremendously from years of cuts and a systemic failure to properly fund even the most essential services. Our local authority finances are on their knees, and this country cannot deliver growth, reform public services or improve life changes without first fixing local government finances.

Jim Shannon Portrait Jim Shannon (Strangford) (DUP)
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I commend the hon. Gentleman for bringing forward this debate. He is absolutely right to underline the importance of local government. I served as a local councillor for some 26 years before I came to Parliament, so I understand the importance of local government. He is outlining why Government needs to commit to funding for local towns and cities across all of the United Kingdom. Does he feel that Government’s interaction with local government should be the first stop when it comes to organising funding and understanding what the real issues are on the streets?

Tom Morrison Portrait Mr Morrison
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I completely agree. There has to be a two-way dialogue, in which the Government talk and work with local government to work out the challenges that need to be fixed.

The Local Government Association reports that 29 councils needed exceptional financial support in 2025-26 to set a balanced budget. That is 11 more than the previous year, and I am afraid that number will only continue to grow. The Government’s pride in place strategy is meaningless when local authorities are still being encouraged to sell community commodities such as libraries and leisure centres to avoid financial ruin. That is no way to set our communities up for success. It is stripping away the key things that make a community, the places where people gather and access the support and services that they need. Drawing on dwindling reserves is not a sustainable financial plan.

However, there are also regional inequalities to the issue, which slice across all aspects of daily life, from transport to potholes. Last year’s fairer funding review lacked all nuance, basing criteria for recovery grants on deprivation figures from over a decade ago. Stockport council missed out on any recovery funding; it is now left to pick up the pieces, and to continue fighting tooth and nail without the £20 million it so desperately needs to sustain long-term services, despite having some of the most deprived wards in the UK in our borough. In just three years’ time, Stockport council will be underfunded by £63 million. Despite that, the council won local authority of the year in 2025—a testament to its officers and councillors.

Stockport is a council that does not shy away from hard decisions. It was promised more from the Government, yet things have not changed. In opposition, the Labour party decried the underfunding of local councils across the country and said that things could only get better under its tenure. Well, councils are facing the same problems across the north-west, and we are seeing the same lack of ideas from the Government that we did under the Conservatives. Real-time cuts to local government funding in Stockport alone have reached more than £133 million in the past few years. As a result, Stockport council was forced to find £24.5 million of savings just for the 2025 budget.

Lisa Smart Portrait Lisa Smart (Hazel Grove) (LD)
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As a fellow Stockport MP, I am delighted that my hon. Friend has secured this debate. I strongly agree with the points he is making about the underfunding of local government over a period of years, particularly in our part of the world. I wonder if he agrees that the root of some of the problems is the unsustainability of social care. As his constituent Stuart mentioned, for Stockport council, £3 in every £4 is spent on either adult or children’s social care. The demand for that is increasing, yet the funding available is not. Does he agree that the Government taking three years to do a review into social care is too long, and that they should crack on?

Tom Morrison Portrait Mr Morrison
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I completely agree. The point, when it comes to social care, is political will. All parties have talked about the importance of social care and of getting the funding right. There is no need to wait for three years; we should indeed crack on.

Regional growth drives national growth. If regions are not invested in, we cannot expect the country to thrive. There are ever-expanding divides between regions, which have consequences on the quality and even length of people’s lives. According to the Institute for Public Policy Research, transport illustrates that divide exceedingly well. In London, people receive £1,183 per head for transport, but in the north-west it is less than half that figure, at just £540 per person. In total, across the north, that is an investment gap of £140 billion.

Our growth is low and slow as a country because areas outside the south-east have been neglected time and again. Anne, another constituent of mine in Bramhall, wrote to me recently to explain her frustrations. She said:

“Residents are being asked to pay more while receiving less and now must pay extra just to maintain a service that was previously included. Public frustration is escalating rapidly across online forums, community groups, and social media. What can be done about this?”

It is no wonder the public are increasingly frustrated when core spending power for local government remains 16.4% lower in real terms this year compared with 2010. The services that local government provides are vital to people’s everyday lives: bin collections, green space maintenance, street cleaning and social care for our most vulnerable residents.

If local governments can no longer sustain those services, our country will decline rapidly as people’s everyday quality of life suffers. Although the guarantee of multiyear settlements and a move away from fragmented, ringfenced grants are a step in the right direction, that is still not enough. Those changes will not be felt and frustrations will continue to grow, especially as the Government continue to work on the basis that local authorities will continuously raise council tax by the maximum 4.99% each year.

Jonathan Hinder Portrait Jonathan Hinder (Pendle and Clitheroe) (Lab)
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I am pleased that the hon. Member is leading this debate and glad that he is raising the point of regional inequality. Does he agree that council tax is the most unfair, regressive tax in Britain, and that it is long overdue a proper overhaul to link property values to the amount of tax paid, as is not the case at the moment?

Tom Morrison Portrait Mr Morrison
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I thank the hon. Member for that intervention and agree completely that council tax is regressive, impacting the poorest in our communities. All parties should commit to finding a new way forward to reform it.

Councillors and council staff do not want to raise council tax. The public, already squeezed by a difficult cost of living crisis, will struggle to pay more time and again. It does not have to be that way. We must have the political will to empower our local governments to deliver their full potential. I want to outline to the Minister that politics is local. Chronic national issues will turn into deeper crisis if local governments continue to be squeezed to the point of no return. The Government must understand the benefits of investing in local authorities to do their jobs right and give the people of Cheadle, the north-west and all areas the good quality of life they deserve.

Giving all councils the power and resources to invest in community centres, parks, libraries, children’s centres and green spaces will restore people’s trust and respect, not just for their local authorities, but for central Government. We are now in a situation where the Government need to invest in councils just so that they can keep the lights on without fear of going bankrupt. It really is that serious.

Local government is capable; given the resources, it will deliver for our communities. We need to invest now without delay. Proper support now to address challenges earlier will lead to fewer councils requiring more intensive and costly interventions later down the line. Local government is the linchpin for change. It is a pool of potential waiting to be unlocked, and I urge the Government to do just that.

16:13
Alison McGovern Portrait The Minister for Local Government and Homelessness (Alison McGovern)
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It is, as ever, a pleasure to serve under your chairship, Mr Turner. I thank the hon. Member for Cheadle (Mr Morrison) for initiating the debate on this important topic. He rehearses arguments I heard made in this Chamber and in the Chamber of the House of Commons for 14 long years, as local government funding was slowly undermined by the Tories. The Osborne cuts—I am making myself sound very old, Mr Turner, but you will remember those days—fell on town halls almost more than anywhere else. I have great sympathy with the hon. Member’s argument.

Our country is diverse and all our towns and cities face unique challenges arising from their own economic and social history. As the hon. Member rightly set out, when local government is successful, people experience public services that are specific to them, and every place is given the best chance of growth. He is right to connect dissatisfaction with politics overall with the place of local government. It is in all our interests to see it succeed.

With the UK Government and local government working closely together, we can achieve our collective aims. As the Member of Parliament for Birkenhead in Merseyside, I am more than aware of the challenges and opportunities that our region faces. The Government are committed to making sure that local government in the north-west and across England is put on a sustainable and secure footing. Doing so after 14 years of damage will be complicated, but I believe we can make progress.

The local government finance settlement for 2025 to 2026 made available £69 billion of funding through core spending power, of which £9.4 billion—14% of the total for England—was allocated to the north-west. The settlement marked the beginning of the Government’s commitment to rebuild and stabilise local government. That commitment included introducing a new £600 million recovery grant targeted at those areas with greatest need and demand for services and less ability to raise income locally.

I hear what the hon. Member for Cheadle says about Stockport and the recovery grant. I repeat the comments I just made: it was specifically targeted on the basis of need. In recovering the financial position of local authorities, an important golden thread that runs through all the steps that the Government will take is that we will objectively consider need, deprivation, poverty and inequality to make sure that we are supporting local government to help rebalance our country and provide services in a way that helps everybody to have the best chance of thriving. In the north-west, 78% of councils received an allocation of the recovery grant, totalling £146 million—24% of England’s total. That is the first meaningful step towards funding reform, which was not achieved under the Tories.

Our ambition does not stop at this year’s settlement. The spending review provided more than £5 billion of new grant funding for local government over the next three years, allowing us to move forward with reforms that will reduce the pressure on local government. This year my predecessor embarked on a consultation on the long delayed fair funding review because the outdated way in which local authorities are funded has left some places behind. We intend to redirect around £2 billion of existing funding to the places and communities that need it most, ensuring the best value for Government and for taxpayers.

For the first time since 2013-14, the Government are updating the relative needs formulae that form a key part of how local authorities’ funding allocations are calculated. This year, those reforms will be delivered through the first multi-year settlement in a decade, giving councils the certainty that they have long called for, enabling more spending on prevention and less on paying for the costs of failure. I would be a rich woman if I had a pound for every time somebody in local government, over the past 14 years, had asked me for multi-year settlements to enable forward planning and focus on prevention. Introducing them is an important cornerstone of the Government’s new approach to local government.

The reforms will also change the fragmented local government grant funding landscape. We will consolidate as much revenue funding as possible into the local government finance settlement, bringing funding together into the multi-year settlements so that we do not have such a complex mix of funding. For 2025-26, we consolidated almost £700 million into the settlement. We are going further and faster for 2026-27, and will deliver the biggest programme of funding simplification to date. That frees up resources for public services and helps local authorities to decide for themselves the most effective way to spend money in their communities.

However, funding reform is only one part of the story. As the hon. Member for Hazel Grove (Lisa Smart) mentioned, we have to change public services to best serve residents and communities. There are areas where we have to consider not just funding but how the services are changing, and how need for them has shifted. The spending review confirmed more than £2 billion over the next three years for children’s social care reform. We are determined to invest in prevention, fix the broken care market and crack down on excessive and exploitative profit making. We will set out further detail on funding for children’s social care reform in the local government finance settlement.

We are also committed to reform the adult social care system, and to build a national care service. We will consider recommendations from phase 1 of the independent commission into social care led by Baroness Casey when she reports in 2026. The Government have made a major step in boosting the wages and working conditions of adult social care workers across England, with an extra £500 million investment into the first ever fair pay agreement for care workers.

For special educational needs and disabilities, we have ensured that funding for schools is increasing by over £4.7 billion a year by 2028-29 compared with the 2025-26 core schools budget that was published at the 2025 spring statement. With that funding, we will reform the SEND system to make mainstream schools more inclusive, improve outcomes and stop parents having to fight for support.

We also recognise the pressures that local authorities are facing because of their dedicated schools grant deficits. In June, we announced a two-year extension to the DSG statutory override, which is now due to end in March 2028. We will set out further details in our plan to support local authorities with historical and accruing deficits through the upcoming local government finance settlement.

The Government have also already taken the first steps to getting back on track to end homelessness, including investing over £1 billion in homelessness and rough sleeping services this year—an extra £316 million compared with the previous year—to prevent rises in the number of families in temporary accommodation and to prevent rough sleeping. That may sound like an objectively good thing to do—which of us thinks that families could possibly thrive in temporary accommodation? —but having looked at the books, I am also extremely worried about the cost of homelessness and temporary accommodation to councils. The aim of the investment is therefore not just to stop the terrible moral stain of homelessness, but to help maintain the structural integrity and funding of our councils.

On top of that, the Government are setting the foundations to deliver on our plan for change commitment to build 1.5 million homes in England this Parliament, and will deliver the biggest boost to social and affordable housing investment in a generation. That investment will also be preventive and help to secure councils’ funding in a better way.

To focus on the north-west, the Government are investing to help revitalise our districts, towns and cities and to foster thriving communities. Through the local regeneration fund, the north-west is benefiting from over £1.5 billion of investment, combining the levelling-up fund, the towns fund and the pathfinder pilot scheme. That reduces the monitoring burden on councils and lets them prioritise how they deliver locally, without micromanaging from Whitehall. In Stockport, that includes a £1.2 million active travel package, £4.4 million for Cheadle eco business park, and £8.2 million for Cheadle railway station.

We have an ambitious programme of reorganisation taking place across England, ending the two-tier system of local government and establishing single tier councils everywhere, including in Lancashire in the north-west. That streamlined approach to local government will also help it to work better.

The north-west, I am very proud to say, has led the way on devolution, as part of the Government’s ambition to see all of England access devolved powers by establishing strategic authorities that can make key decisions to drive economic growth and celebrate our towns and cities. Greater Manchester combined authority and the fantastic Liverpool city region are two excellent and long-standing examples in our region of what can come when devolution happens.

In particular, Greater Manchester has secured a £630 million single funding settlement under its trailblazing devolution deal. That replaces fragmented funding pots and gives the combined authority greater flexibility to allocate funds across priority areas. It has been a pleasure, both in my previous role and this one, to work with Mayor Andy Burnham to bring the vision of city governance for Greater Manchester to life, and to devolve functions from the UK Government to Greater Manchester so that he can integrate services and work with local authority leaders to get the best service for residents.

I thank the hon. Member for Cheadle and everybody who has contributed for the insightful points raised and their ongoing dedication to making sure that local government—our councils—in the north-west have the most powerful voice in this place. We cannot overstate the damage done to the foundations of local government over the past decade and a half. Change has begun and we are ready to listen to all local authorities about how we get this right. I thank the hon. Member for bringing forward this debate.

Question put and agreed to.

16:25
Sitting suspended.