Local Government Funding: North-west England

(Limited Text - Ministerial Extracts only)

Tuesday 21st October 2025 Westminster Hall

[The Minister for Local Government and Homelessness (Alison McGovern)]

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.