Burnham urged to tap up £150bn council pension surplus to boost local economies

Andy Burnham is being urged to tap into a £150 billion surplus sitting in town hall pension funds to boost local economies without raising taxes, borrowing more or breaking any fiscal rules.

Any raid could form part of the Prime Minister-in-waiting’s broader devolution agenda as the former Greater Manchester mayor seeks to shift power away from Westminster and transfer control of taxes such as business rates to regional bodies.

The £550 billion Local Government Pension Scheme (LGPS) for England and Wales is awash with cash, meaning it has more than enough money to pay the pensions of its seven million members now and in the future.

They and their employers, who include local councils and thousands of sponsoring firms, paid in more than £13 billion into the scheme in the 2024-25 financial year, the latest figures show.

It is estimated that nearly £1 in every £4 of council tax goes into the coffers of the LGPS.

Contributions are invested in stock markets and other assets. In return members get a guaranteed pension based on their final or career average salary.

Ros Altmann, who served as Pensions Minister in the Conservative government under David Cameron, wants these contributions to be paused and the money used instead to improve local services such as social care, libraries, further education colleges or bin collections.

‘It’s a scandal,’ she told The Financial Mail on Sunday. ‘Local authorities can’t fill potholes but they are paying huge sums into pension funds that don’t need the money. I find it staggering that more councils aren’t saying this is bonkers.’

Her views are echoed by former Birmingham city council leader and public pensions expert John Clancy.

He highlights the case of the Greater Manchester Pension Fund (GMPF), the largest in the LGPS with assets of £33 billion, which is run by close Labour Party allies of Burnham, pictured inset, on Tameside council.

The GMPF has amassed a near-£11billion surplus, according to a draft set of accounts for 2025-26 seen by The Financial Mail on Sunday.

Ultimately this surplus ‘belongs to the taxpayer’, said Clancy, who reckons the region’s 2.3 million adults are ‘owed’ almost £5,000 each.

Reform UK, which leads in the opinion polls, also wants to use some of the LGPS’s £147 billion surplus to cut council taxes by reducing town hall pension contributions.

The party also wants to turn the LGPS into a sovereign wealth fund that would ‘patriotically back Britain’ by investing in home-grown businesses and projects.

But pension payment ‘holidays’ are controversial and the legal status of surpluses is unclear.

‘It is an easy win to try and unlock these surpluses at a time when interest rates are high and schemes are well funded,’ said Professor Iain Clacher of Leeds University Business School.

‘But it needs very careful consideration and a full understanding of the costs, benefits and risks of doing so,’ he added

Burnham could be Prime Minister by the middle of next month if no other Labour MP puts their name

forward. He is scrambling to put together a credible economic plan that will placate the bond markets who lend money to the Government to plug the gap between what it spends on public services and raises in tax.

Among the ideas Burnham is considering is giving England’s regional mayors the power to raise their own taxes and spend the money as they see fit.

This could include allowing them to set business rates in their own areas.

Business owners, especially in the hospitality and leisure sectors, want to see the business rates levy overhauled and lowered to save dying high streets and boost local communities.

A spokesperson for Burnham was contacted for comment.