North East mayoral authority expects to earn £29m in interest this year

The North East Mayoral Strategic Authority expects to earn £28.9m in interest this financial year, more than four times the £6.8m it budgeted for.

The reason is timing. In April, the government paid the authority its full year's Integrated Settlement grant of about £417m in a single payment. The money is spent over months and years, as projects are developed, approved and contracted. Until payments are due, the authority holds it in bank deposits and other investments, earning interest.

The Integrated Settlement brings together government funding for transport, housing, skills and economic development under the region's devolution arrangements.

The authority started April with £451m in investments. The grant payment and other receipts brought the total to £905m by 30 June.

Why it planned for so little

When the authority set this year's budget, it assumed it would earn £6.8m in interest to help cover its running costs. It kept the figure low on purpose. Interest income falls when rates drop or money is spent, and the authority did not want its day-to-day costs to depend on unusually high returns.

A report to Cabinet in September raised the forecast to £28.9m because the authority is holding more cash, at higher interest rates, than it assumed when it set the budget.

Housing money waiting to be spent

Housing shows how this happens. The authority budgeted £21.9m of expenditure from its Integrated Settlement housing allocation for this year. It now expects to spend £5m because new schemes have to be developed, appraised, approved and contracted before they move into delivery. Until then, the money stays invested.

Where the extra goes

The extra interest is not being used to increase the authority's running budget. In 2025/26, it earned £22.4m in interest, £15.6m more than budgeted. That contributed to a wider corporate surplus, and in July Cabinet agreed to transfer £19.4m into a new Interest Reserve, to fund future projects or manage financial risks.

The September report proposes adding this year's extra interest to the same reserve when the financial year ends in March.

The £19.4m is about the same as the £19.5m Cabinet approved in March for an offshore wind infrastructure programme supporting ports and quaysides.

Projects funded from the reserve go through the authority's usual approval process, with larger proposals decided by Cabinet. The published Cabinet papers and forward plan do not yet identify any projects funded from it.

The authority is not alone. Greater Manchester Combined Authority earned £17.2m from its investments in 2025/26, against a budget of £2.3m.

The authority's next financial update is due in November, and Cabinet is scheduled to meet on 24 November. It has not said when it will decide the first allocation from the reserve.