North-West Labour MPs Threaten Commons Rebellion Over Council Funding
Keir Starmer is facing a potentially damaging rebellion from Labour MPs representing northern constituencies, who are threatening to vote against the government's three-year local funding settlement in the Commons. The MPs argue that the current allocation unfairly disadvantages towns in the north-west of England.
Liverpool Region MPs Lead Charge for Fairer Distribution
Labour MPs from the Liverpool city region have written directly to Local Government Secretary Steve Reed, urging him to reconsider the recent provisional settlement. They contend that northern towns are being penalised by a formula that partially bases allocations on housing costs rather than focusing on areas with genuine deprivation driven by low incomes.
Their position has been strengthened by support from Steve Rotheram, the Labour Mayor of the Liverpool City Region, who has submitted a similar letter advocating for increased funding for northern towns including Wigan, Warrington, and St Helen's.
Constituency Pressures and Electoral Concerns
One MP revealed the depth of concern among north-western colleagues, noting that many face electoral challenges from Reform UK and need tangible investment to demonstrate government effectiveness to their constituents. The funding issue has created significant anxiety among MPs who see their local authorities preparing budgets that will necessitate further service cuts.
Anneliese Midgley, MP for Knowsley, highlighted the problem in the Commons last week, stating that the provisional settlement fails to address the deprivation needs in her constituency where low incomes are the primary driver of hardship.
Systemic Flaws in Funding Allocation
While ministers announced a provisional three-year settlement last year that redirected resources from southern regions toward major northern and Midlands cities, MPs and council leaders from northern towns argue their areas have lost out. They maintain that the inclusion of housing costs in deprivation calculations has inadvertently shifted funding back toward London and the south-east, where housing expenses are typically higher.
Jim McMahon, MP for Oldham West and former local government minister, acknowledged government efforts to stabilise local government and recognise deprivation as a cost driver. However, he identified a critical gap when local authorities present budgets requiring further cuts despite escalating demands for children's services, adult social care, and temporary accommodation.
Calls for Additional Funding and Systemic Reform
McMahon has called for an extra £400 million annually to be allocated to the "recovery grant" targeting councils with the highest levels of need. Stephen Houghton, Labour leader of Barnsley Council, echoed concerns about the housing cost factor in deprivation indices redirecting northern funding southward.
Analysis by the Special Interest Group of Municipal Authorities, representing 49 urban authorities, indicates dozens of councils face real-terms funding reductions over the next three years. Separate Local Government Association calculations suggest approximately 15 top-tier councils and 115 district councils in England will experience real-term funding decreases, with many located in London and the south-east.
Growing Financial Crisis in Local Government
Local authority leaders warn that increasing numbers of councils may seek special "bailout" loans to avoid effective bankruptcy and maintain essential services. Last year saw a record 30 councils in financial distress relying on exceptional financial support totalling £1.5 billion, with more expected to apply this year amid rising demand and soaring costs in social care and homelessness services.
Exceptional financial support enables councils to meet legal requirements to balance budgets through loans, asset sales, or council tax increases exceeding normal caps. Recent recipients include insolvent councils such as Birmingham, Thurrock, and Croydon.
Louise Gittins, Chair of the Local Government Association, has called for urgent additional funding to protect councils from real-terms cuts and deeper, long-term reform to ensure financial sustainability of local services.
Government Response and Funding Figures
A spokesperson for the Ministry of Housing, Local Government and Communities defended the settlement, stating that nearly £78 billion has been made available to England's councils this year. The government claims to have radically overhauled the funding system inherited from previous administrations to ensure the most deprived communities benefit.
By the conclusion of the multiyear period, authorities will have received a 15.1% cash-terms increase to support delivery of high-quality public services, according to the ministry's statement.
