Media Release

Local Government in 2040: councils must embrace risk and change to survive

A new report by the Social Market Foundation think tank, supported by leading public sector insurer Zurich Municipal, says that councils will have to change how they operate if they are to cope to with a range of challenges and risks facing them and the communities they serve.

The report – Local public services 2040 – identifies six key challenges that local government will have to face over the next two decades:

  • an ageing population will put increasing pressure on health and social services
  • more fragmented families will live in more dispersed communities, and will have higher expectations of service quality
  • localised environmental risks around flooding and air pollution will grow significantly
  • huge opportunities created by technological advances will also cause disruption to local job markets
  • greater fiscal devolution will present the opportunity for councils to control their destiny as well as risks around the resilience of their local tax bases

Our findings show that employment in local government has fallen by a quarter — 800,000 employees — between the start of 2010 and 2017. Meanwhile, local government’s net borrowing has been increasing since 2013/14.

These challenges are coming at a time when local government is already under huge financial pressures: the last time local government ran a fiscal surplus – with revenue exceeding expenditure – was in 1996. In the 2016/17 fiscal year, local government net borrowing stood at £8.6bn.

The SMF report is being published soon after the Local Government Association said that councils face a £5.8bn funding gap by the end of the decade. The LGA believes that 75% of central funding is to be cut by 2020.

In order to respond to this changing environment, the SMF report recommends five different models that councils could adopt:

  • “Industrial councils” will address market failures in infrastructure and help their communities to adapt to technological change.
  • “Ofcouncils” will pursue social objectives through greater regulation, including in the housing market.
  • “Tech opportunists” will use technology to their advantage, using robots and carers to provide a blended mix of support to those requiring social care.
  • -“Commissioning councils revisited” will use charity and voluntary providers to drive down costs, and will innovate with new practices such as financing services and projects through crowdfunding ventures.
  • -“Community councils” will make greater use of communities to deliver services, which will include addressing the shortfall of family carers and the growing problem of loneliness through networks of intergenerational support.

The report also recommends a range of further actions councils will have to take to succeed: they will need to take on new responsibilities beyond statutory duties to help their communities, and become more creative in finding ways to sustaining and build their tax base and other revenue streams.

They will also have to act as “market makers” and managers to bolster their local economies and sustain their local community sector, whilst driving better value for money in contracted services through innovation and competition. Councils will also have to develop new organisational competencies, for instance in industrial policy, regulation and commissioning.

Nigel Keohane, SMF research director, said:

“Councils look set to be squeezed into the 2020s and beyond with continued funding constraints, growing demand from an older population and the need to respond to new environmental risks.

“We should expect significant innovation in how councils respond, whether this is looking to regulation, to industrial policy, to new technologies, or to communities themselves and the resources within them.”

Andrew Jepp, Managing Director, Zurich Municipal, said:

“Devolution is central to the future of public service provision in the UK. Power is flowing from Whitehall to Town Halls and City Halls across the country and citizens are demanding more from their local authorities. Councils are having to respond to these rising expectations whilst dealing with an incredibly challenging funding environment.

“In these circumstances, it can be easy to become preoccupied with the short to medium term risks and challenges. The local government sector must put in place robust plans to minimise and mitigate the risks and threats that will materialise over the long term and at Zurich Municipal we will do all we can to support them in this task.”

“We hope today’s report – with its recommendations and warnings – will become required reading for Council leaders up and down the country as they begin to plan today for the risk landscape of public services in 2040.”

James Kirkup, SMF director, said:

“Councillors already face fierce opposition when they make difficult decisions about local services and this report suggests that those pressures will increase in the years to come.”




Notes to editors

  • About the Social Market Foundation

The Social Market Foundation (SMF) is an independent, non-partisan think tank. We believe that fair markets, complemented by open public services, increase prosperity and help people to live well. We conduct research and run events looking at a wide range of economic and social policy areas, focusing on economic prosperity, public services and consumer markets. The SMF is resolutely independent, and the range of backgrounds and opinions among our staff, trustees and advisory board reflects this.

About Zurich Municipal:

Zurich Municipal, part of Zurich’s UK General Insurance division, is a leading provider of risk and insurance solutions to Britain’s public services.  We are dedicated to providing expert advice and support to public service providers including local authorities, social housing providers, educational institutions and charities and voluntary organisations. For information visit

Zurich in the UK

Zurich provides a suite of general insurance and life insurance products to retail and corporate customers. The UK General Insurance division supplies personal, commercial and local authority insurance through a variety of distribution channels. Zurich’s UK Life business* offers a range of personal protection, pensions and investment policies available through financial intermediaries.  UK life also provides protection and pensions policies for the corporate market available through employee benefit consultants.

Based at 21 locations all across the UK – with large sites in Birmingham, Cardiff, Farnborough, Glasgow, London, Swindon and Whiteley – Zurich employs approximately 7,000 people in the UK.

  • Interviews/media enquiries
  • For interviews with SMF experts, please contact SMF communications manager Mercedes Broadbent on // 07425 609 148 // 020 7222 7060
  • For more details about the SMF, please contact SMF communications director David Mills on


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