Exceptional Financial Support: Transformation Funding

Jim McMahon Excerpts

Tuesday 15th September 2026 Written Statements

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Jim McMahon)]

After a decade and a half of austerity, over-centralisation and rising demand for targeted services, we have inherited a system in which too many councils have been left struggling to manage financial pressures.

Over the past two years, the Government have 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 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 that are contributing to system strain, rather than short-term measures that focus only on the symptoms.

Following requests from 37 areas, in February the Government agreed to provide exceptional financial support of £1.5 billion 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 that we are taking, by providing £91 million 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 that puts funding where it is needed most. Most councils in receipt of exceptional financial support see significant increases in core spending power over this Parliament, which demonstrates 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 are 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, the Government are 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 has also commissioned the Chartered Institute of Public Finance and Accountancy 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 15 reviews have now been published on gov.uk—providing councils with a clear diagnosis and road map for improvement. To support that improvement, in a number of places the Department and the Local Government Association are also working with councils to provide targeted support, for example to improve capacity.

We have also today written to 14 of the councils to confirm some additional funding to accelerate their plans for service reform and transformation. These councils are: Bradford, Brighton and Hove, Haringey, Havering, Isle of Wight, Isles of Scilly, Lambeth, Redbridge, Redcar and Cleveland, Sefton, Stoke-on-Trent, Trafford, Waltham Forest and West Berkshire.

My officials have worked with those 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 intend 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 aim to demonstrate that with co-ordinated, 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 roll-out 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.

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