Local Government Finance

Jim McMahon Excerpts

Wednesday 17th December 2025 Commons Chamber

[Alison McGovern]

The hon. Gentleman is absolutely right to highlight how we have to do things differently in rural areas, and we have tried to take account of that need. That is why we are including a journey times adjustment in our assessment of cost for all services. We are also increasing the cap in the home-to-school transport formula from 20 miles to 50 miles, in recognition of the fact that the original distance cap would penalise local authorities that have no choice but to place children further from home. We are also including a remoteness adjustment in the adult social care formula to address the point that he mentions. Overall, the point cannot be made enough that we have to do things differently in rural areas, and we all need to take account of that.

[Jim McMahon (Oldham West, Chadderton and Royton) (Lab/Co-op)]

The fair funding review is significant. It is the first multi-year settlement for a decade, and the first real attempt at fairly distributing resources based on need, cost and the ability to raise revenue locally. It represents a serious piece of work by decent public servants, and I pay tribute to the finance team in my hon. Friend’s Department. The consultation asked councils to make their case for adjustments. London councils asked for housing to be included in the measure of deprivation, and we can see that in some of the changes that have been made, but that sees a significant shift towards London. The recovery grant has made a significant difference and I am pleased to see it continue, but it shows that fundamentally the formula is not yet picking up the real cost pressures being felt by local government as a result of the previous Government.

Much has been said about council tax, but the inequality goes much further, as the Minister knows: our car parking income is £2 million, but Westminster city council alone generates £90 million. That is more than the entire recovery grant for Manchester, Liverpool, Newcastle, Sheffield and Leeds combined, so there are much wider structural issues that need to be addressed. My hon. Friend will also know that, despite best endeavours, councils will still find this settlement very challenging and that bigger reforms are needed, so can she make the case—I know she will—to her colleagues in the Treasury that, if the Government want the benefit to be felt on every street in every community, in the end local government will need more money put into the pot more generally?

[Alison McGovern]

First, I must pay tribute to my hon. Friend for his work on this. I might be putting the ball in the net today, but he was the midfielder who created the goal. It is his work to reconnect deprivation and council funding that we are delivering today, and I pay massive tribute to him. He asked whether we might go further to persuade our Treasury colleagues to invest in local government. I think that the best way to do that—I will welcome his support in this—is to show the results that councils get when they are properly invested in. We see that nowhere more than in his home city region of Greater Manchester and his council of Oldham, which show time and again that they provide value for money and they are growing our economy.