Optimism alone won’t balance the budget for local authorities

After years of financial uncertainty, rising demand and relentless pressure on services, there is a growing sense that the public sector is entering a different phase. The challenges have not disappeared, but public sector leaders now feel, for the most part, they have greater clarity about the road ahead.  That was the case, at least for most, until we hit the ‘pause’ on Local Government Reorganisation. 

Findings from Mapping public sector risk, resilience and readiness 2026 highlight a shift in sentiment across the sector. The proportion of leaders expressing a pessimistic outlook has fallen significantly from 56% to 37%, while optimism has risen from 26% to 34%. At the same time, the number of respondents taking a neutral view has increased from 16% to 25%, suggesting a sector moving away from crisis mode towards a more measured and pragmatic outlook. 

For local government, recent funding announcements may have played a role in this. The introduction of a multi-year Local Government Finance Settlement, alongside reforms to the funding distribution model through Fair Funding Review 2.0, has given councils a level of certainty many have not experienced for years. The ability to plan over a longer horizon provides an opportunity to think more strategically about organisational priorities, investment and reform 

However, greater certainty does not necessarily translate to greater financial resilience. Demand for services continues to rise, workforce pressures remain significant and many councils are still expected to deliver transformation whilst managing increasingly constrained resources. 

Local government reorganisation is a milestone, not the destination 

A central theme emerging from Mapping public sector risk, resilience and readiness 2026 is the need for organisations to move beyond short-term responses and focus on long-term resilience. For many local authorities, local government reorganisation (LGR) has become an important part of that conversation. 

Councils have been investing significant time and energy in designing new structures, governance models and operating arrangements. While these changes create opportunities, there is a risk that organisations become focused on the mechanics of reorganisation rather than the outcomes it is intended to achieve. With the government announcement earlier in September 2026 of the withdrawal and pause on many, feelings of uncertainty have increased.  

Reorganisation alone will not solve local government’s most pressing challenges. It will not automatically improve financial sustainability, address workforce shortages or transform service delivery. What it can do is provide an opportunity to take a step back and ask more fundamental questions about how councils operate, collaborate and create value for their communities.

These are the questions that will determine whether reorganisation becomes a catalyst for transformation or simply another structural adjustment. 

Transformation must become more than a collection of projects for local authorities 

Transformation has become one of the most frequently used terms in local government, appearing in corporate plans, change programmes and strategic priorities across the sector. 

Yet transformation can sometimes become an umbrella term for multiple disconnected initiatives rather than fundamental organisational change. 

Many councils already have programmes focused on service redesign, technology, efficiency and modernisation. The challenge is determining whether those initiatives collectively move the organisation forward or simply improve individual parts of it. 

This challenge becomes even more relevant as councils increasingly look towards digital transformation, AI, data-led decision-making and new service delivery models. While these initiatives offer significant opportunities, they are unlikely to deliver lasting benefits unless they form part of a broader strategic shift – moving beyond isolated projects. 

Risk and assurance need renewed attention 

As local authorities navigate financial pressures, transformation programmes and organisational change simultaneously, focus also needs to be given to strengthen risk management, governance and assurance. 

One of the most common issues encountered across the sector is fragmentation. Risk, compliance, internal audit, programme assurance and performance reporting often operate independently of one another, making it difficult to build a complete picture of organisational resilience. 

Improving resilience is not only about introducing more controls or more reporting, but creating a more integrated approach to assurance that enables leaders to identify emerging risks, make better decisions and support long-term transformation. 

What’s next for local government? 

The easing of pessimism across the sector should not be viewed as a signal that the hard work is done, but instead it offers some breathing space. 

Local authorities need to use this opportunity to strengthen resilience, accelerate transformation and modernise their approach to risk and assurance. 

Resilience will not be built through structural reform alone, but it will come from clear leadership, meaningful transformation and a willingness to rethink how organisations manage risk, deliver assurance and prepare for the future. 

The opportunity is there, so the challenge now is making the most of it.