See the big picture
Regional policy is a key part of the new government’s growth ambition and local government will have a significant part to play, whether in its current form or as new mayoral combined authorities. While there is no promise of new money, local authorities can at least look forward to the first multi-year funding settlement in several years, bringing more certainty to spending decisions.
Head of Government and Local Authorities, Barclays Corporate Banking
Preparing for devolution
It’s clear the new Labour government’s plans to devolve greater powers to restructured local government bodies – such as mayoral combined authorities – are key to its plans for improved delivery of public services, levelling up and promoting growth generally. Supporters of local government reorganisation (LGR) see it as a way to give England’s regions near autonomy in funding and policy decisions around health and social care, transport, skills and economic development.
Such potentially significant changes will without doubt be the big topic of debate in the local government sector in 2025, not least because there are questions no one can yet know the answers to: is there the political will within central government to see LGR through, and just what is the right ‘Goldilocks’ size for local government to best deliver services to residents. For some councils, the debate – kicked off by the government’s English Devolution White Paper – could turn out to be literally existential if they are eventually replaced by a new local government body.
We can say with some confidence there will be some level of local government reorganisation, but it remains to be seen just exactly what form that will take, so this is the big debate in 2025 and beyond.
Head of Government & Local Authorities, Barclays Corporate Banking
Whatever structural changes in local government may or may not be in the pipeline, there’s no doubt demand for their services continues to increase – whether it be care, special educational needs (SEND) or temporary accommodation for the homeless. What I’m hearing from clients in the sector is that meeting that demand will be a continuing challenge in the year ahead.
Taking temporary accommodation as an example and setting aside the funding costs (a whopping £90m a month in 2024 for London boroughs), there sometimes just isn’t the capacity of housing to meet demand and staff levels have dwindled too. An Association of Directors of Adult Social Services survey – which found that 81%1 of councils were on course to overspend their adult social care budget in 2024/25 – illustrates the challenge. However, there is some good news around restoring capacity and building resilience in local services. The English provisional Local Government Finance Settlement is set to provide £69 billion overall for councils across the country, with councils seeing on average a 3.5% real-terms increase in Core Spending Power, including £2 billion additional grant funding for 2025/26.2
Decarbonising housing
It’s generally accepted that the built environment is a significant contributor to climate-changing emissions and local authorities (LAs) will need to continue to attend to the decarbonisation of their estates, particularly through retrofitting their existing social housing to be more energy-efficient. Doing that while also trying to focus on increasing their stock is something of a dichotomy for councils, and question marks remain over the route to decarbonisation of existing homes, both in terms of funding and capacity to deliver.
However, an encouraging development I’m seeing, and which could continue in the year ahead, is LAs proactively engaging with the private sector – both funders and construction firms – to explore partnerships that can help deliver on decarbonisation ambitions. Aside from targeting their housing stock, I expect to see LAs continue to take a lead in the decarbonisation of communities and driving investment in the green economy, for example through electrification of local transport services, and the introduction of congestion charges.
Digitalisation and, more recently, the adoption of generative AI, undoubtedly has a part to play for local government in serving residents and businesses more effectively.
Building talented teams to deliver against whatever devolution and LGR brings is imperative.
Collaboration with experienced delivery partners could be the key to success in decarbonisation.
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Keeping fraud front of mind
Fraudsters are as active as ever across the local authorities sector, impersonating our colleagues and attempting to defraud our clients. To help protect you and your business we have a wealth of resources available. You can view our quarterly fraud webinars and take a look at our other educational resources on our Fraud Protection Hub.
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