This report argues that local government must play a much bigger role in tackling the UK’s long-standing productivity problem.
While national debate often focuses on the private sector, local authorities account for substantial public spending and shape many of the conditions that support growth, including housing, planning, skills, public health and social care. Yet the sector’s contribution to productivity has been held back by fragmented funding, reduced capacity, and a central government approach that has too often treated productivity growth as a short-term initiative rather than part of a longer-term transformation.
For their part, local authorities have often been characterised by risk aversion and do not have robust measurement of productivity in place. The report’s central claim is that productivity in local government should be understood not simply as ‘doing more with less’ but as improving public value through better service design, prevention, digital transformation and stronger collaboration across institutions. We argue that past reform efforts have too often been superficial, top-down, or narrowly focused on ‘budget efficiency’, as we outline in chapter two.
As a result, local authorities have not been treated by central government as strategic partners with responsibility for improving the productivity of their institutions or the places they represent.
In chapter three, the report presents measurement as a major obstacle. Local authorities deliver hundreds of services, but productivity is only systematically measured in a narrow range of areas, especially adult and children’s social care. In many other services, data is inconsistent or incomplete. This makes benchmarking, learning and evaluation difficult. We therefore make the case for a sector-wide Local Government Data Strategy to standardise what is measured, how often, and in what format. We also argue that strategic authorities need their own bespoke performance measures, given their powerful role in shaping local economic performance through investment, co-ordination and system leadership.
The report also highlights prevention as one of the clearest routes to higher productivity in chapter four. Preventative spending can reduce avoidable demand, improve outcomes and free up capacity in overstretched services. However in practice it is often crowded out by immediate financial pressures, short-term (political) time horizons and fragmented funding rules.
The report recommends a clear cross-government framework for defining what counts as preventative spending, alongside a new Prevention Settlement for local authorities that would give them more flexibility to align funding streams around early intervention.
The importance of digitalisation and artificial intelligence are also rapidly emerging themes in local government, as we highlight in chapter five. These technologies can reduce administrative burdens, improve responsiveness and, complementing preventative spending, help redesign services around earlier intervention. Councils are already using AI for tasks such as call handling, transcription, recruitment support, risk identification and case management. However, there is a disjuncture between rhetoric to describe AI’s potential and the current reality of its use-cases. It is clear that progress in this area is being slowed by poor interoperability, legacy systems, limited technical skills and weak 2 data-sharing arrangements. To address this, this report recommends investment in digital transformation and stronger national and sub-national support for innovation, including scaling models like the Office for Public Service Innovation.
Finally, in chapter six, the report stresses that productivity depends on organisational capacity and leadership. Local authorities have lost staff, face high vacancy rates and often lack the leadership continuity needed for long-term transformation. They need stronger workforce planning, better use of staff skills and more support to learn from innovation across the sector. Shared services, partnerships with universities and stronger local-state capability can all help authorities work more effectively.
Overall, the report argues for a shift away from episodic efficiency drives and toward a coherent long-term reform programme. Its recommendations: better data, clearer prevention frameworks, freedom to innovate, investment in digital transformation, stronger innovation capability and capacity-building are all ingredients necessary to increase local government productivity. Together, these reforms would help local authorities move from crisis management to continuous improvement, making them not just more efficient institutions, but more productive shapers of local growth and public value.
Authors Jack Shaw, Joe Peck