The 2025 Spring Statement arrived at a precarious moment for local government. As demand for services surges and financial pressures mount, local authorities are teetering on the brink. But deeper, more sustainable reform is what's truly needed. What will it take for us to create sustainable public services that support the Government's ambitions for growth?
Local government running on empty
The Government's short-term fixes have, for now, delayed the prospect of more local authorities issuing Section 114 (S114) notices as part of the 2025/26 budget setting round. However, more councils needed Exceptional Financial Support (EFS) to avoid issuing S114s ahead of the 2025/26 financial year.
With billions in revenue costs now shifted to the top half of balance sheets through EFS - and billions more hidden in SEND deficits at the bottom - there's no clearer sign that the system is on the verge of collapse.
Recent funding settlements from both the previous and current governments have provided some temporary relief, but they fall far short of solving the deeper issue. Fundamentally, more money itself won't fix a broken system. What's needed is real, structural change that dares to answer the big questions: What are local authorities for? And how should they be funded sustainably?
Long-term vision: or are we stuck in the same old cycle?
I followed this week's statement closely, and one remark from the chancellor stood out to me: ‘Change doesn't happen overnight.' I couldn't agree more. But at the same time, change doesn't—and shouldn't—happen by accident or without a plan. And that's exactly what's still missing: a clear, long-term strategy for public services, particularly for local government.
The outcomes of the Spending Review now feel more significant than ever. It's a pivotal moment—an opportunity for the government to take public service reform seriously, to recognise that sustainable economic growth and prosperity are built on well-functioning, efficient public services. It's also a chance to break free from the cycle of short-term thinking that has held back progress and innovation for far too long.
That said, I find myself torn between hope and pragmatic scepticism.
The hope is easy to grasp. A Spending Review that lays out day-to-day spending plans until 2028-29, capital spending plans to 2029-30, and a 10-Year Infrastructure Strategy sounds like the perfect foundation for a long-term vision for the UK and its public services. In local government, we're already seeing ambitious structural changes—through reorganisation, new delivery models, and devolution—that could redefine how councils operate. These shifts present real opportunities to rethink how services are planned and delivered.
And once the initial shockwaves settle, the decision to abolish NHS England could pave the way for stronger local accountability, creating the conditions for more effective collaboration between local partners. There are, undeniably, reasons for optimism.
The scepticism is just as easy to grasp. Change doesn't just require a plan—it requires investment, and investment comes with costs. This week, the Government announced £14 billion in cuts, including politically uncomfortable reductions to the welfare bill. The chancellor needed these savings to rebalance the books and restore some fiscal headroom, but that headroom remains minimal and fragile.
At the same time, there's a clear commitment to reducing the size of the state. While there are undoubtedly opportunities to drive efficiencies and boost productivity through technology, it's naive to assume that digital transformation alone can fill the gaps in our public finances. There is a risk that rather than creating a smaller reductive state what we may end up with is managed decline.
Reform or regress?
As the Government looks ahead to the Spending Review, the choices made will shape the future. This is a moment to embrace meaningful reform —reform that addresses the root causes of the public service's financial woes.
Short-term fixes and incremental changes won't cut it. What's needed is bold, systemic change —change that ensures local services remain resilient and capable of meeting the needs of communities for years to come.
The Spending Review will be the chance to reimagine the future. This time, we can't afford to miss the mark.
Iain Murray is CIPFA director of public financial management
