Pothole politics risks undermining MHCLG’s efforts to simplify funding

Politicians are obsessed with potholes. The previous government promised to recycle some of the funding from the cancelled HS2 line into filling potholes, while Labour, in opposition, pledged to scrap the A27 bypass to direct money to pothole repairs. Now, as part of a broader £4.8 billion investment in roads, the government has announced an extra £500 million for potholes.  ²² Press release https://www.gov.uk/government/news/pm-tells-councils-to-prove-action-on-pothole-plague-to-unlock-extra-cash-and-reveals-48bn-for-major-roads

Because local roads are managed by local authorities, the government has tied this money to detailed performance metrics to ensure that local councils ‘prove action on pothole plague’.  ²³ https://www.gov.uk/government/news/pm-tells-councils-to-prove-action-on-pothole-plague-to-unlock-extra-cash-and-reveals-48bn-for-major-roads  By the end of June councils must have published reports on their spending, pothole repairs, road conditions and how they are minimising street works disruption. These reports must be updated annually, and the government will withhold 25% of the funding (£125m) from local authorities who fail to meet this requirement.  

Accountability is essential, and it is reasonable that local government does not have complete freedom over how funds are used. But tight conditions risk being self-defeating, creating bureaucratic inefficiency and disincentivising innovative local solutions.

Excessive reporting places a burden on local and central government  

The Department for Transport’s approach adds to the already complex and fragmented system of local government funding.  

As we set out in our Funding local growth in England report last May, local authorities manage a patchwork of funds, which are generally small, tightly ringfenced – setting out what they can be spent on and when they can be spent – and administered and monitored by various government departments and arms length bodies. A wide range of reporting requirements drain resources and limit local authorities’ ability to focus on service delivery and other areas of policy development.  

This impact is also felt in Whitehall. A lack of capacity in DLUHC contributed to delays in distributing Levelling Up funding under the last government as it battled to deal with 1,399 bids from UKCRF, LUF and Freeports at the same time.  

On top of existing responsibilities, civil servants in the Department for Transport will now need to review the reports from the 119 unitary and county councils in England and 32 London Boroughs which all have responsibility for local roads.  ²⁴ https://lgiu.org/resources/local-government-facts-and-figures/local-government-facts-and-figures-england/  Requiring civil servants to check that local councils are meeting their reporting requirements could lead to them being entangled in checking and verifying hundreds of local council reports and data points on potholes. This bureaucratic burden risks creating a bottleneck that could delay distribution of the remaining funding. This approach also runs counter to the plans laid out only last week to cut administrative waste in the civil service.  

Restrictive targets lead to short term fixes and can incentivise the wrong type of action

Funding is needed to improve the resilience of roads in England, but tying it to pothole filling targets risks incentivising ineffective and short-term solutions. Councils are filling potholes at a rate of one every 17 seconds,  ²⁵ ALARM survey 2025 https://www.asphaltuk.org/wp-content/uploads/ALARM-survey-2025.pdf  and they reappear because repairs to individual potholes degrade quickly.  ²⁶ https://theconversation.com/why-britains-politicians-are-obssessed-with-potholes-and-why-they-still-cant-seem-to-fix-them-232787  

The reason for devolving funding is to harness local knowledge in decision making, allowing councils to allocate funding where they will have the greatest impact. So a better approach would be to set broad outcome targets, rather than narrow output targets, and allow places more flexibility to spend the money in a way that they deem most appropriate for their area.

In many areas, for example, a more sustainable approach would be to prioritise full road resurfacing – more expensive but more likely to produce lasting improvements  ²⁷ The current backlog of road resurfacing is estimated to cost £17 billion https://www.asphaltuk.org/alarm-survey-page/#:~:text=Every%20year%20the%20Asphalt%20Industry,to%20proactively%20improve%20the%20network.  – or directing money into cycling infrastructure or measures to reduce car use  rather than prioritising filling as many potholes as possible. Safeguards are needed to ensure public money is well spent, but excessive restrictions limit local authorities’ ability to respond to the specific needs of their communities.

Whitehall must work together to end the parent-child approach to local government funding

This announcement lays bare the challenge of driving local government funding simplification across government. MHCLG has committed to reducing the number of grants local authorities receive and to consolidating funding, and the department has criticised the current “parent-child dynamic” because it is “costly, inefficient and patronising”.  ²⁸ English devo white paper p 17 https://www.gov.uk/government/publications/english-devolution-white-paper-power-and-partnership-foundations-for-growth  However, it is only one department of several that interacts with and funds local authorities. If the rest of Whitehall does not amend its approach, simplification and consolidation will only go so far.

Our report recommended that the Treasury should commit at the next spending review to simpler funding for local authorities and set out clear guidelines for how any future funding streams will be spent. As ministers find some money, or look to deliver on particular objectives, the default response is often to set up a new fund to tackle that particular objective or to deliver a specific type of project, but creating tight conditions for spending those funds should not be the default approach of ministers  

For local government funding simplification to succeed there needs to be a whole of government approach. The multi-year spending review in June is the Treasury’s opportunity to lay down the ground rules to help MHCLG achieve this aim.