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Keir Starmer is confronting potential unrest within his own ranks as Labour MPs representing towns in the north-west of England demand increased funding for their local councils over the next three years. These MPs, particularly those from the Liverpool city region, have expressed strong discontent with the government’s recent three-year funding settlement. In a letter addressed to the local government secretary, Steve Reed, they argue that the current allocation unfairly disadvantages northern towns.
Supporting this stance, Steve Rotheram, the Labour mayor of the Liverpool city region, has also sent a letter urging for more investment in northern areas including towns such as Wigan, Warrington, and St Helens. The funding deal is due to be debated in the House of Commons, with some MPs indicating they might vote against it to pressure the government into revising the settlement. One MP commented that the issue is causing significant concern among north-western representatives, many of whom face challenges from Reform UK in upcoming elections and want their constituents to experience tangible benefits from government spending.
Anneliese Midgley, the MP for Knowsley, highlighted the discrepancy during a Commons debate, pointing out that the provisional local government funding does not address the specific needs of her deprived constituency, which is driven by low incomes rather than housing costs. The government’s provisional settlement, announced last year, shifted money from the south towards major northern and midland cities, basing allocations partially on housing costs. Critics argue this method overlooks the root causes of deprivation in many northern towns, where lower incomes rather than expensive housing are the primary issues.
Jim McMahon, MP for Oldham West and former local government minister, acknowledged the government’s efforts to stabilize local government funding and recognize deprivation as a key factor. However, he pointed out that councils continue to face budget pressures due to increasing demands for children’s services, adult social care, and temporary accommodation. McMahon has called for an additional £400 million annually to be added to the “recovery grant” to support councils with the highest needs. Echoing these concerns, Stephen Houghton, leader of Barnsley council, criticized the use of housing costs in the deprivation index, saying it has diverted funds away from northern areas back to southern regions.
Analyses by groups such as the Special Interest Group of Municipal Authorities reveal that many councils will experience real-terms cuts in government funding during the next three years. Despite this, a separate report by the Local Government Association finds that some councils, primarily in London and the south-east, are also facing reductions in total funding. To cope, an increasing number of local authorities are expected to seek “exceptional financial support” (EFS) loans, a form of government bailout that helps them meet legal budget requirements. Last year saw a record 30 councils secure these loans, totaling £1.5 billion, with more predicted to follow amid rising social care and homelessness costs.
Louise Gittins, chair of the Local Government Association, emphasized the urgent need for new government funding to prevent real-terms cuts and encouraged collaboration on long-term reforms. She warned that without additional support, local councils might struggle to remain financially sustainable while continuing to provide essential services to their communities
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