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Rewiring the state: unlocking local government’s role

Rewiring the State offers the radical vision needed to turn the corner on permacrisis and decades of centralisation. This vision will require serious efforts across every level of government to deliver. To articulate what this means in practice for local government, LGIU brought together leading voices from more than 70 councils, universities, think tanks, and sector bodies across the local government family.

London's Houses of Parliament on a clear day at sunrise

Rewiring the State outlines a bold vision for how strategic authorities, the alignment of public service boundaries, and enhanced fiscal devolution will encourage growth and improve public services across the country (Cabinet Office, 2026). 

Mayoral strategic authorities represent an important new opportunity for place leadership. They can drive growth, strategic innovation and democratic engagement. Local authorities and strategic authorities should not be viewed separately; they are both part of the local state, and they should have a symbiotic relationship in which each improves the other.

There is a balance to be struck between the need for a clear delineation of their roles and the dynamism necessary to best serve local communities across their diverse needs. This paper does not seek to ring-fence or defend a role for councils or strategic authorities, but to identify those parts of a rewired state where councils add unique value and how to maximise this potential. 

For Rewiring to be delivered in the long term, it needs to be visible to the public. Public visibility depends on the right changes at the local level, and local government is often best positioned to identify and implement those changes. One chief executive’s test was to ask what visible change you would see within 15 minutes of leaving your house.  So how can local government play its part in Rewiring?

That was our focus across five workshops and roundtables with over 50 councils and strategic authorities, as well as 20 academics and think tanks. We followed this with conversations with nearly every local government sector body, and invited LGIU Councils to share Autumn budget submissions. Many local authorities are already shaping long-term visions for their places, so this Autumn presents an unparalleled opportunity for the sector to collectively define what we, as partners in a rewired state, offer (Paterson, 2026). 

But we must be grounded in reality. While recent finance reforms give some reasons for optimism, existential pressures remain. Rising service demands have rapidly outstripped diminished resources, hollowing out local democratic institutions. This includes capacity. Allowing for academisation, local government workforce has shrunk by almost a third (CCN 2024). In contrast, from 2016 to 2026, the civil service increased by a third (Cabinet Office 2026).

Our 2026 survey of council finances finds that despite finance reforms, 39% of councils expect to need Exceptional Financial Support in the next five years (LGIU, 2026). Our polling with Ipsos finds that 51% of the public do not trust their council to act in their best interests, while 61% of people want more information and influence over how decisions are made locally (LGIU and Ipsos, 2026).

This is precisely why a radical rewiring is needed. A decade of incrementalism has failed to drive growth in local areas, integrate public services, or respond adequately to residents’ needs. What we ask for now is a radical vision matched with relentless delivery, resulting in a fully powered-up local government. 

Rewiring the State should be a vision that unfolds across all tiers of government: from the hyperlocal neighbourhood to the local council to the regional mayor to the nationally-led shared objectives. 

So far, there is considerably more focus on defining the emerging playbook for strategic authorities. From our workshops, it is clear that councils view Rewiring the State as an opportunity to establish a more defined settlement on the role of local government – in relation to both higher-complexity people services and broader place-making services that stimulate growth. 

Our research shows that 6 in 10 adults in England say they know little or nothing about the work of councils, and this must change (LGIU and Ipsos 2026). We know that local government exists to improve the wellbeing of both people and place. To do this, we have articulated six defined roles for local government in a rewired state.

Councils are responsible for the services that support people when they need them most: adult social care, children’s services, and homelessness. These services work best when they begin with the person and join directly to the wider local system of housing, leisure, planning and schools. 

Councils are the only body that simultaneously spans those services, holds the relevant legal duty and has a democratic mandate in the same place. Keeping these services local by default, with the power to bring partners together, gives councils the ability to better manage the services that are already their greatest financial risk.

Streets, parks, libraries, leisure, youth services, heritage and shared public spaces are where people experience the local state every day, and where trust is won or lost (Paterson, 2026). One chief executive’s test was to ask what visible change you would see within 15 minutes of leaving your house. 

The same services are the social infrastructure on which health, cohesion and economic participation depend, reducing demand on the NHS, the police and the benefits system. Councils know their places. They hold the relationships with health, police, skills providers and the voluntary sector, and they can pull the levers that join services up around residents. 

Treating these services as national infrastructure and investing for long-term value, as we do in roads, rail and digital networks, would help Rewiring the State gain credibility with the public and enable it to drive real prevention (Paterson, 2026).

Local Growth Plans coordinate investment at a regional scale, but growth happens in particular places: on sites councils own, through planning decisions they make, in homes they let, and in town centres they regenerate. It is councils that connect regional strategy to the people, businesses and communities who translate it into jobs and homes. They do this through planning, by shaping local labour markets, their role as landowners and – where they hold stock – as social landlords, their local knowledge, and their own spending, which they can use to secure social value. A rewired state that treats councils as co-authors of Local Growth Plans will find it easier to deliver growth in every postcode.

If Rewiring the State only shifts power down to neighbourhoods and up to strategic authorities, it will be a missed opportunity. Councils provide the democratic foundation to every community. Elected councillors provide neighbourhood, parish and community voices with a route into regional decisions, and give those decisions local legitimacy. Trust in democracy is fragile, and given the current proposals for Local Government Reorganisation, this means even fewer councillors are likely to represent more people. A rewired state cannot afford a gap between the neighbourhood and the mayor.

Councils are the grounding connection that makes change visible and durable from the residents’ perspective. They are small enough to try new things and close enough to see quickly whether they work. What the system lacks is a route from local innovation to national practice, so good ideas are proven locally and then stall. 

Committing in advance to scale what works, even when that changes how other public services spend their money, would give Rewiring the State a ready-made test bed for the public service reform it sets out to deliver.

Strategic authorities are built from their constituent councils and are only as strong as those councils. As money and power flow to mayors, the public needs accountability that is local, visible and proportionate, working between elections as well as at them. Parliament alone cannot provide that across dozens of regional budgets. Councils bring local mandates and local knowledge to the task. In return, they should accept shared outcomes and report on their own contribution to regional goals. Accountability that runs both ways will enable strategic authorities to make bigger decisions with public confidence.

The goal is rightly that the public enjoys the outcomes of policies shaped where they live, and that there is good growth in every postcode. But that won’t happen unless we properly consider the system from the citizen in the neighbourhood, to the local, regional, and national levels. The risk is that we default to incremental, reactive change, leaving Rewiring subject to political reversals.

Tiers and institutional layers should not be guided by a narrow “who does what” question. The goal is for different spheres to work it out together and use the regional and local constructs where they add value. A new mindset is required to realise a rewired state, where every sphere plays to its strengths and place, rather than politics prevailing.

This requires a step up for local government. In a rewired state, councils should be ready to share data openly with partners and strategic authorities. They should be measured against a shared outcomes framework alongside every other tier of government. They should scale or stop pilots based on evidence rather than habit. And they should work across boundaries wherever scale serves residents better, including accepting that some functions move up a tier when the case is clear.

As one participant put it:

Figure 1 illustrates how this mindset should work across a rewired state model. Powers and funding flow down; knowledge, democratic consent and outcomes that justify the exchange flow up.

Figure 1: Rewiring – from the neighbourhood to the national

What does each sphere do?

  • National government’s role is to create the shared objectives and set the frameworks, funding across national services such as health, and minimum standards that hold the system in place.
  • A region is where strategic authorities lead, invest, and coordinate at scale in transport, housing, and economic growth, and reinvest the benefits of growth via fiscal devolution. The best mayors bring the whole system with them. They provide a single voice to champion regional challenges, provide leadership on public sector reform, and hold national government to account on issues like housing, transport, NEETS, and rough sleeping. 
  • Local government uses democratic accountability and local knowledge to provide and commission services for people and places.  Councils provide the upstream foundational services in housing, leisure and community safety that underpin prevention across health and policing. And councils commission complex services for children, SEND and adults because they understand the link between people and their local place. But councils are necessarily restricted by their boundaries for service delivery and democratic accountability, and require additional capacity for cross-regional work.
  • Neighbourhoods are where people experience the state in its most intimate form: the GP surgery, the park, the local bus stop. They are places where people can act together to make a difference in their own communities. Pride in Place is a key example of how neighbourhoods are places where local voices can drive innovation, because they are small enough for lived experience to shape delivery (ICON, 2026a). Councillors live within neighbourhoods, and councils shape and are shaped by them through the unique power of local connection.

Spheres should not be read for a neat distinction between institutions. Rewiring should encourage messiness. Good councils and good strategic authorities will do both strategy and delivery. The focus is not on drawing institutional lines; it is on a place and understanding where the value-add comes from each sphere in housing, transport, and public sector reform. This is what place over politics means. 

With this understanding, the question then becomes: how do we optimise relationships and interactions between different spheres and systems?

Local government has a crucial role to play in a rewired state, both in the functions it delivers and the connective role it plays within a wider system. Councils know they have to keep improving and adapting, but leaning into the strengths of local government is essential to the success of the Rewiring project: better outcomes for citizens, economic growth, and democratic renewal in every community in the country. Chapter two explores how we could bring the rewired state to life.

Chapter One asked what a rewired local government does and how it works within a local system. Chapter Two focuses on the policy changes required to unlock the potential of local government in a rewired state. 

Much of this work is already underway. The government is committed to improving sustainability across the core high-need services that threaten councils’ financial resilience: temporary accommodation, social care, and SEND. We support these commitments, but we believe that the government should accelerate the Casey Commission and SEND reform even further to ensure we minimise the number of councils requiring Exceptional Financial Support. 

To support this, we’ve created a roadmap for rewiring local government. This includes the practical policy implementations achievable within this Parliament, mapped across the three thematic areas arising from the Rewiring the State Cabinet Statement. This roadmap builds on LGIU work with leading voices from more than 70 councils, universities, think tanks, and sector bodies across the local government family. 

Challenge: Rewiring the State sets out ambitious plans for aligning public service boundaries. This is a real opportunity, but alignment alone does not enable genuine reform of high-cost statutory services. Managing demand in these areas, and ultimately improving the lives of citizens, can only be achieved through a preventative shift to relational, user-centred and place-based services – and only councils can lead that change. 

Our recommendations

  • Amend the English Devolution and Community Empowerment Act in early 2027 to implement a statutory power for councils to convene when designing and implementing services at a neighbourhood level, and a new statutory duty to respond for other services operating on a neighbourhood footprint. 
  • Introduce a general power to pool budgets, including the public health budget, for councils and other neighbourhood services, under prevention plans, to reduce friction when designing place-based approaches (Denham and Studdert 2024).
  • Introduce a co-designed standing mechanism for negotiating transfers of power and funding between tiers. A statutory Right to Propose process, giving a council (or group of councils) a formal route to propose alternative solutions to a national or regional approach and a requirement on MHCLG to respond. 
  • Co-terminousity should be enhanced by enabling the flexible pooling of Public Health Grants and reviewing the role of Health and Wellbeing Boards to ensure it is appropriate for integrating health to local services in a Rewired State.
  • Introduce a framework for modelling and monitoring preventative spend, and consider the provision of preventative spend as part of the finance settlement (CIPFA 2026). 
  • Design the forthcoming neighbourhood duty to give rural areas the flexibility they need to reflect their unique needs. Rural devolution needs to find its feet, and councils should be able to shape their future around specific rural needs by working with agencies responsible for energy, food and water.
  • Expand the Mayoral Data Council and the Office for Public Service Innovation, working in partnership with local authorities to accelerate data-sharing.

Outcome: Throughout these changes, councils must be given the power to convene and model service operation at a neighbourhood level and build democratic accountability into every place-based service. Councils are the only public body with the connections, skills and democratic authority to convene and redesign services around people rather than institutions, acting as the connective tissue of a rewired state, in which prevention is treated as a national priority. These reforms should collectively enshrine the principle of subsidiarity in the rewired state, where every state function is performed at the lowest possible level, moving up only when there is a clear reason it cannot be performed at that level.

Challenge: Fiscal devolution is not a guarantee of financial sustainability. According to LGIU research, 39% of councils expect to apply to Exceptional Financial Support within the next five years. Fair Funding, multi-year settlements and the retention of business rates are a start, but reforms must go much further. Council tax – an outdated, inefficient, and inadequate mechanism that is the single largest source of local revenue – is entirely absent from Rewiring the State.

Our recommendations

  • Publish a formal policy statement setting out the objectives, principles, and pathways for fiscal devolution readiness for local councils (APPG 2026).
  • Explore integrated neighbourhood settlements, extending the model of integrated settlements for councils to align funding streams. 
  • Review and reform the New Burdens formula so that new duties always carry the funding to deliver them.
  • Ensure that reforms to adult social care and children’s services come with in-year stabilisation grants so that reform improves the number of residents’ lives.
  • Recognise the growing number of councils applying to Exceptional Financial Support (EFS) by providing a roadmap for councils to exit EFS.
  • Implement systematic local taxation reform at the council level: Provide local authorities with either a new tax to replace council tax, or at a minimum, a wider basket of taxes alongside council tax rebanding, revaluation and a review of the referendum limits to offset the inadequacies of council tax. 
  • Introduce a dynamic, regularly updated and statutorily entrenched territorial equalisation formula that aims to provide resources to ensure minimum service standards across local areas, as in the German Basic Law, with a funding formula that guarantees revenue appropriate for delivering minimum service standards, and reduce the risk of exacerbating existing territorial inequalities. 

Outcome: Fiscal devolution alone will not ensure financial sustainability, but it should empower councils to raise and spend revenue in ways that work best in their local area, while the territorial equalisation formula should prevent any single authority from falling below the minimum level needed for service delivery. The floor should be supported by the centre, and the ceiling should be defined by local leaders. 

Challenge: Devolution cannot succeed if responsibilities are handed to local or strategic authorities without the capacity and capability to make the most of them. Many local governments are constrained by shortages of headcount, skills, and experience, which will limit the effectiveness of devolution. Current approaches to capacity focus on the strategic authority and on the movement of personnel. This is only part of the puzzle. Capability is relational, and we need to build greater local system capability so everyone can play their part in a rewired state.

Our recommendations

  • Publish the review of statutory services, as a consultation, by the end of 2026, and use this to set out what local and regional tiers provide.
  • Follow the consultation with a single document codifying the powers and responsibilities of each tier in early 2027.
  • Develop the Leaders Council into a standing commission consisting council leaders and mayors, to meet central government on all relevant matters, underpinned by statutory requirements for Ministers to consult and respond within fixed timelines
  • Commission a review on the role of Arms Length Bodies like Homes England, Sport England, Arts Council, British Business Bank, National Housing Bank and the National Wealth Fund in a Rewired State. Having local and regional bodies decide on funding priorities should be the minimum. 
  • Develop and publish a local and strategic authority workforce strategy, equivalent to the NHS Long Term Workforce Plan, with a focus on three levels:  (1) pipelines to ensure headcount in high-demand services; (2) recruitment and retention of technical experts; and (3) skills development for leaders. The workforce strategy should extend its consideration to elected members and build their scrutiny, governance and system leadership capabilities. This is especially important as reorganisation will reduce the number of councillors. 
  • Mutual accountability requires a shared focus on what outcomes we seek. This requires moving from a multiplicity of local government, health, and strategic authority reporting frameworks to a single Shared Outcomes Framework. Doing this requires rewiring existing and underpinning legislation.
  • Strengthen public participation by amending the Local Media Action Plan to include a funding stream targeted at reporting on devolution and strategic-authority decision-making.
  • Build local system capability. As the government moves civil servants out of Whitehall, we need to reverse the declining capacity in local government. MHCLG needs to review how the sector support grant can enable a locally-led approach to leadership development, which focuses more on shadowing and secondments. This is best achieved by local or regional programmes, and any existing national programmes should include the local and regional workforces.
  • As Whitehall reduces in size, capacity should increase in local and strategic authorities. To enable this, a portion of the Mayoral Capacity Fund should be ring-fenced for local government to share capacity-building.

Outcome: When it comes to capability, a strategic authority is only as strong as its weakest constituent council. Capability is about getting the right people with the right skills and resources into place, while establishing strong relationships between councils, strategic authorities, other public and community bodies and ultimately, the public. It cannot begin and end with funding, or be constrained to only a single level of government.

Chapter One asked what a rewired local government does and how it would work within a local system. Chapter Two identified a series of policy recommendations to achieve this. Chapter Three visualises this new rewired model of local government and proposes a definition of “good”. 

Turning the page by 2030 for local government means fewer councils on EFS, aligning health and police boundaries, the maturity of genuine hyperlocal neighbourhoods, every corner of England covered by devolution, and the vesting of new unitary councils. 

Table 1 visualises the roadmap for successfully rewiring local government, based on the policy recommendations in Chapter Two. It will not be a panacea for future macro challenges related to demographics and climate change. Instead, these are the steps needed to fix the fundamentals of the local state for Rewiring so that place trumps politics and the 2030s become the decade of growth, improved wellbeing and a functional state.

The road to successfully rewiring local government

What is local governments role?
How do we get there?
What does this look like in 2030?

Sustainable public services that start with the citizen.

  • Accelerate Casey Commission and SEND reforms, and sequence this with reforms to health, police and education.
  • Reforming New Burdens formula.
  • Published roadmap for councils to exit EFS.
  • National workforce strategy for high-demand services.
  • EFS becomes exceptional again, with fewer than 5 councils in receipt by 2029-30.
  • Sustainable funding settlement for high-demand services.
  • Co-terminous boundaries.

Place-based services are treated as the foundations of prevention.

  • Framework for monitoring and modelling preventative spend.
  • General power to pool budgets.
  • Statutory territorial equalisation formula with minimum service standards.
  • Enable pooling of Public Health Grants and review the role of Health and Wellbeing Boards.
  • Increase local spend on parks, libraries, and leisure.
  • Prevention is becoming routine and tracked by the Local Audit Office.
  • Greater shared ambitions through pooling between NHS, Mayors and Councils.

Growth happening where people live.

  • Formal policy statement on pathways to fiscal devolution.
  • Review of Arms Length Bodies.
  • New local capacity via secondments, shadowing and moving civil servants to local and regional government.
  • Reform of local taxation.
  • London benefits from a new governance settlement to improve decision-making.
  • Place comes first, politics second.
  • Local and regional bodies benefit from the rising portion of local share from national taxation.
  • One public sector approach allows ideas and excellence to move from local, to regional, to national.

Councils convening between the neighbourhood and the region.

  • Statutory power to convene and duty to respond at the neighbourhood level.
  • Co-designed a standing mechanism for negotiating the transfer of powers and funding.
  • Ring-fenced Mayoral Capacity Fund for partnership capacity between regional and local 
  • Alignment of neighbourhood health and governance.
  • Truly hyperlocal governance that incorporates parish and town councils.
  • 100% coverage of devolution.

Local innovation that shapes national practice.

  • Statutory Right to Propose.
  • Expanded Mayoral Data Council and Office for Public Service Innovation are working with councils.
  • Modernised Sector Support Grant with multilevel secondments.
  • A right to propose allows powers to move fluidly from regions to local areas. 
  • Test, Learn and Grow moves from the Cabinet Office to Strategic Authorities.
  • National acceptance of policy variations in local areas.
  • Rewiring becomes the platform for further devolution.

Accountability running between councils, Strategic Authorities and the centre.

  • Leaders Council becomes a Standing Commission with statutory duties on Ministers to respond.
  • Review how national regulation regimes can be joined into a Shared Outcomes Framework.
  • Needs-based assessment before powers are devolved.
  • Parity of esteem across spheres of the Rewired State.
  • Aligned incentives in health, local government and Strategic Authorities.
  • Shared concordats and conventions underpinning central-local relations

Rewiring is the floor, not the ceiling, for local government empowerment. Looking beyond the White Paper, the key question is how do we make change durable? 

For a durable settlement that makes change last, our LGIU@40 manifesto called for a new constitutional framework that should build upon the following core principles.

Rewiring the State is the most significant opportunity to transition to a modern, functional system of governance. The prize is not an institutional rewiring; it is a visible change that communities see and feel by 2030. That means breathing life into high streets and town centres, it means sustainable public services that are integrated around the citizen, and it means fewer young people out of work, education or training. And the local state, comprising councils and strategic authorities, is key to winning the battle for trust and participation required to deliver this rewired state. 

Our publication is only a starting point. We describe the role of local government, articulate how this system should interact, and identify a roadmap for maximalist yet pragmatic policy changes.

Autumn 2026 and the subsequent White Paper will be a test for the radicalism and delivery required to implement a Rewired State. Our focus will be to work with councils and strategic authorities to empower the local state to deliver better outcomes for individuals.

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We are particularly grateful to Helen Paterson, Chief Executive, Northumberland County Council, who provided a rich source of thinking on the purpose and future of local government, and Jack Shaw, Director of Groundwork Research, who provided insights on the direction of devolution.

With thanks to all of our contributors. All comments included in this report are anonymous. The opinions expressed are those of the LGIU and do not reflect the opinions and beliefs of individual contributors.

Abdool Kara, Executive Director, National Audit OfficeMark Rogers, Interim Chief Executive, Sussex & Brighton Strategic Authority
Abigail Taylor, Research Fellow, City-REDI, University of BirminghamMark Sandford, Senior Researcher, House of Commons Library
Adam Terry, Executive Director, Future Governance ForumMartin Thompson, Head of Policy, Liverpool City Council
Alex Walker, Senior Researcher, Re:StateMatthew Fright, Associate Director for Devolution, Institute for Government
Alison Potter, Assistant Director for Policy, Local Councils NetworkMichael Wood, Head of Health Economic Partnerships, NHS Alliance
Amanda Kelly, Partner, Head of Local and Regional Government, KPMGMichael Chard, Director of Policy and Analysis, Association of Directors of Adult Social Services
Andrew Dawson, Business Manager, Northumberland County CouncilMichael Cullen, Chief Executive, Stockport Metropolitan Borough Council
Andy Pike, Professor, Newcastle UniversityMike Barker, Deputy Chief Executive and NHS Place Director of Health & Care Integration, Oldham Council
Anna Wyatt, Senior Researcher, Carnegie UKMiranda Cannon, Chief Executive, Westmorland and Furness Council
Arianna Giovannini, Professor, University of Urbino Carlo Bo, ItalyOsian Jones, Director of Strategy, Design and Insight, London Borough of Camden
Ben Lockwood, Deputy Chief Executive and S151, Ashford Borough CouncilOwen Mapley, Chief Executive, CIPFA
Chris Elliott, Chief Executive, Warwick District CouncilPaul Burkinshaw, Chief Executive, West Lindsey District Council
Doug Wilkinson, Chief Executive, Maldon District CouncilPhil Rance, Chief Operating Officer, Local Partnerships
Dr Joanie Willett, Associate Professor, University of ExeterPhil Hunter, Deputy Chief Executive, Northumberland County Council
Helen Paterson, Chief Executive, Northumberland County CouncilPhil Holmes, Executive Director of Adults, Wellbeing and Culture, City of Doncaster Council
Dr Jack Newman, Lecturer in Politics and Public Administration, University of LiverpoolRhonda Cadenhead, Assistant Chief Executive – Strategy and Communities, London Borough of Southwark
Helen Bailey, Chief Executive, London Borough of SuttonRobert Pollock, Chief Executive, Cambridge City Council
Jack Shaw, Director of Groundwork Research and Fellow, The Productivity InstituteRichard Brooks, Strategic Director of Resources, London Borough of Harrow
James Hood, Director, Local Councils NetworkRory Sherwood-Perkin, Head of Policy, Engagement and Insight, South Tyneside Council
Jason Lowther, Director, Institute of Local Government Studies, University of BirminghamSarah Robson, Deputy Chief Executive & Corporate Director of Communities, Place and Economy, Sevenoaks District Council
Jen Green, Deputy Chief Executive and Executive Director of Corporate Services, Salford City CouncilSimon Kaye, Director of Policy and Research, Re:State
Jonathan Werran, Chief Executive, LocalisSophie Broadfield, Chief Executive, Bath and North East Somerset Council
Jonathan Tew, Chief Executive, South Tyneside Metropolitan Borough CouncilStephen Gabriel, Chief Executive, Tamworth Borough Council
Karen Griffiths, Head of Strategy Policy & Service Planning, Walsall CouncilSteve Blatch, Chief Executive, North Norfolk District Council
Katherine Merrifield, Deputy Director, Health FoundationStuart Hoggan, Local Government & Housing Consultant, Former DCLG / Independent
Kevin Muldoon Smith, Professor, Northumbria UniversitySusan Priest, Chief Executive, Folkestone and Hythe District Council
Lynne Ridsdale, Chief Executive, Bury Metropolitan Borough CouncilTom Pike, Chief Executive, Stevenage Borough Council
Will Benson, Chief Executive, Tunbridge Wells Borough CouncilTony Travers, Professor, London School of Economics and Political Science
Tom Walker, Executive Director, Policy, Economy, Investment and Property, Essex County Council

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