How Are Local Authorities Responding to Growing Financial Pressures, and What Can We Learn?


Sarah O’Meara

In 2024, the International Public Policy Observatory (IPPO) is partnering with New Local to carry out a research project focused on the severe fiscal constraint faced by local authorities.

The aim is to better understand how local governments are responding to the financial crisis, and if there is potential to share  transferable practices between authorities. Drawing on these insights, the research will make recommendations for both local authorities in responding to financial constraints and to inform national policymakers about how local areas could have more flexibility and resilience to operate effectively despite resource constraints.

In our early scoping phase, our team led by IPPO’s Policy Evidence Lead Urte Macikene, has asked local authority staff how financial pressures have shifted in recent years, and how their councils are responding to these unprecedented fiscal challenges.

Some clear themes emerged, which inform what we will explore in the next stages of the project.

There’s an overwhelming sense that the real-life connection between how local government is funded and what it needs to deliver has been lost. Local public services are grappling with demand pressures outside their ability to control, which have their root cause in longer term structural challenges and trends such as ageing and deepening inequality. In addition to receiving reduced funding, local authorities are confronted with complex and inadequate provider markets which mean that costs are high but quality can be low. 

This research is particularly timely, says Jessica Studdert, Deputy Chief Executive, New Local, as the current operating environment for local government is increasingly constrained:

“We need to build a clear understanding in real time how local authorities are responding to financial pressures. The sector is currently at the receiving end of a series of short term, disconnected decisions and national responses so far have not measured up to the scale of the challenge. We hope this project offers a route to exploring what a new direction for the sector could look like, where barriers to achieving more impact are identified and removed, and longer term solutions to financial challenges are put in place.”

On June 26th and July 10th, we will be holding workshops with local authority staff to delve into key themes stemming from early research. 

The first workshop will focus on how local authorities are making the most of their financial power in difficult circumstances, including rethinking procurement mechanisms and using existing purchasing power to shape markets.

The second workshop will focus on how local authorities are approaching prevention in the context of rising demand, including balancing long term investment upstream with more immediate demands on budgets and using existing assets and services for prevention.  

Both workshops will consider the role of partnership working with wider public services and communities.

While the workshops in June and July are aimed at senior local authority officers and representatives, we plan to organise a public-facing event for a wider audience later in the year. If you’re interested in becoming involved, please contact Urte Macikene.