Andy Burnham is facing pressure to access a £150 billion surplus within the Local Government Pension Scheme (LGPS) to stimulate local economies, a move that could be integrated into a wider devolution agenda aimed at transferring power from Westminster.

The LGPS, which manages £550 billion across England and Wales, is reported to have sufficient funds to cover current and future pension obligations for its seven million members. Recent figures indicate that contributions from members and their employers, including local councils and businesses, exceeded £13 billion in the 2024-25 financial year. Approximately one-quarter of council tax revenue is directed towards these pension funds.

Former Pensions Minister Ros Altmann has advocated for pausing contributions to the LGPS to redirect funds toward improving local services such as social care, libraries, and waste collection. "It's a scandal," Altmann stated, questioning why councils struggling with basic services are contributing large sums to well-funded pension schemes.

John Clancy, a former public pensions expert and leader of Birmingham City Council, supports this view. He pointed to the Greater Manchester Pension Fund (GMPF), the largest within the LGPS with £33 billion in assets, which is managed by individuals associated with the Labour Party. A draft of the GMPF's 2025-26 accounts suggests it holds a surplus nearing £11 billion. Clancy asserts that this surplus ultimately belongs to taxpayers, estimating that adults in the Greater Manchester region are each owed nearly £5,000.

Reform UK, currently leading in opinion polls, has also proposed using a portion of the LGPS's £147 billion surplus to lower council taxes by reducing town hall pension contributions. The party further suggests transforming the LGPS into a sovereign wealth fund to invest in domestic businesses and projects.

However, the concept of pausing pension payments is controversial, and the legal standing of such surpluses remains unclear. Professor Iain Clacher of Leeds University Business School noted that unlocking these surpluses could be an "easy win" given high interest rates and the well-funded status of many schemes. Nevertheless, he stressed the need for "very careful consideration and a full understanding of the costs, benefits and risks of doing so."

Burnham, who could potentially become Prime Minister, is reportedly developing an economic plan to address concerns from bond markets. One proposal under consideration is granting regional mayors in England the authority to levy and spend taxes, including business rates, in their respective areas. Business groups have expressed a desire for an overhaul and reduction of business rates to support struggling high streets and local communities.

This article is based on reporting from The Financial Mail on Sunday.