Written statement: Exceptional Financial Support: Transformation Funding - Sep 15

Minister for Local Government, Devolution and Regional Growth (Jim McMahon): After a decade and a half of austerity, over-centralisation and rising demand for targeted services, we have inherited a system where too many councils have been left struggling to manage financial pressures.

Over the last two years, the government has taken steps to fix the foundations for a more sustainable funding system for local government in England. In February, the government delivered the first multi-year Local Government Finance Settlement in a decade, with a fairer and simpler approach to allocating funding for day-to-day services. This was alongside major reforms to high-cost services including children's services, homelessness and rough sleeping, and action to resolve Special Educational Needs and Disabilities deficits by writing off 90% of councils' Dedicated Schools Grant (DSG) high needs deficits accrued to the end of 2025-26

This has been part of a wider commitment to support councils differently and work in partnership to deal with the causes which are contributing to system strain, rather than short term measures which focus only on the symptoms.

Following requests from 37 areas, in February the government agreed to provide Exceptional Financial Support of £1.5bn to enable all of them to set a balanced budget while being clear that we would continue to work with them to provide the support and challenge necessary to break the damaging cycle of councils having to borrow or sell assets to manage financial pressures.

Today I am updating the House on a further step we are taking, by providing £91m of targeted funding that will support some of those councils in the most challenging financial positions to invest in prevention and modern, effective services that will underpin long-term sustainability.

As the government set out when confirming Exceptional Financial Support, the most important first step has been to fix the underlying drivers of financial failure by delivering a fairer local government settlement which puts funding to where it is needed most. Most councils in receipt of Exceptional Financial Support see significant increases in Core Spending Power over this Parliament demonstrating that we are getting money to where it is needed most.

However, we know that the challenges facing councils are complex, and there is no single solution. The government is working to support and challenge councils in a range of ways, tailored to their circumstances.

In a small number of councils where there is clear evidence that councils' challenges are rooted in or exacerbated by weak financial management or governance arrangements, government is taking the appropriate action under the Best Value framework. Depending on the severity of issues, this can mean commissioning an inspection, appointing Commissioners or Envoys, or issuing a Best Value Notice to set clear expectations for local improvement where a council is at clear risk of not meeting their Best Value Duty. In July this year my department confirmed that new or renewed Best Value Notices would be issued to four of the councils that received EFS in February, and reflecting more significant concerns we commissioned a Best Value Inspection in Bedford Borough Council which we expect to report in due course.

Aside from those already subject to statutory intervention, for each of the councils that received Exceptional Financial Support, MHCLG have also commissioned CIPFA to work with each of the councils to identify the steps needed to support its financial recovery. This support is funded by MHCLG, and the first set of fifteen reviews have now been published on gov.uk - providing councils with a clear diagnosis and roadmap for improvement. To support that improvement, in a number of places, the department and the LGA are also working with councils to provide targeted support, for example to improve capacity.

We have also today written to fourteen of the councils to confirm some additional funding to accelerate their plans for service reform and transformation. These councils are: Bradford, Brighton & Hove, Haringey, Havering, Isle of Wight, Isles of Scilly, Lambeth, Redbridge, Redcar & Cleveland, Sefton, Stoke-on-Trent, Trafford, Waltham Forest and West Berkshire.

My officials have worked with these councils as they have developed robust plans for showing how targeted additional investment could transform high-cost services and put the council on a more sustainable long-term footing. The councils will be supported to implement their plans with a share of £91 million in further support across 2026-27 and 2027-28.

This investment marks a turning point in how the government intends to support councils to manage their financial position, with greater emphasis on long-term prevention rather than short-term fixes.

Through this approach, the government aims to demonstrate that with coordinated, purposeful investment and effective support and expertise across government, councils can move towards more sustainable models of service delivery over the long term. Stoke-on-Trent, for example, will use this funding to accelerate the rollout of the Families First Partnership Programme locally. These reforms will help children get the best start in life, break down barriers to opportunity, and reduce the long-term pressure on local authority budgets.

Changing the way we work with councils in financial difficulty is a key part of our mission to rewire the state and raise living standards. We will draw lessons from these projects and encourage councils to share their learning widely.

This Written Ministerial Statement applies to England only.