What does the year ahead mean for the future of local government? Five key takeaways

The start of a new year is always a moment for taking stock, and 2026 looks set to be a particularly significant year for local government across the UK and Ireland.

At LGIU’s online member event Welcome to 2026 – what does the year ahead mean for the future of local government (29 January 2026), we brought together a panel of expert voices to explore what’s coming next: from the state of local government finance and the reform agenda, to the future of devolution, and the long-running pressure points in health, housing and public services.

Here are five key takeaways from the discussion.

1) 2026 will be a pivotal year for devolution and local government reorganisation, but clarity is still needed.

One of the clearest messages from the panel was that 2026 is likely to be a decisive year for the next phase of devolution and reorganisation, with the potential to reshape English local government structures and responsibilities for years to come.

However, while the direction of travel may feel set, the detail is far less certain. The panel reflected on the complexity of aligning reorganisation with devolution ambitions, and the importance of ensuring new structures are built around outcomes, not just boundaries.

There was also a note of caution: devolution only delivers if it comes with genuine autonomy, a clear settlement, and the capacity to deliver locally.

Takeaway: devolution in England remains central to the UK government’s agenda, but the sector will need to keep pushing for clarity on powers, governance, geography and delivery support, not just the headline announcements.

2) The financial outlook remains fragile and service pressures are still escalating

Local government finance continues to be the defining constraint on ambition. The panel emphasised that councils are still operating in an environment where demand-led pressures (particularly in high-cost statutory services) are rising faster than the resources available to councils.

This is not simply about efficiency or one-off funding gaps, it’s about structural pressures that are becoming increasingly difficult to manage, particularly around:

• adult social care
• special educational needs and disabilities (SEND)
• temporary accommodation/homelessness
• wider cost inflation across delivery

There was a strong sense that even if reform is coming, financial sustainability cannot wait. Without a credible long-term settlement, local government will continue to face impossible choices.

Takeaway: 2026 will bring renewed focus on reform and funding, but the sector needs solutions that match the scale of service pressures, not short-term sticking plasters.

3) Public service reform will only work if it is place-based and local government is essential to delivery

Public service reform was a key theme but the panel was clear that reform cannot succeed through top-down redesign alone.

Instead, reform needs to be:

• place-based
• preventative
• built around the reality of people’s lives (not organisational silos)

Local government’s role here is not optional. Councils sit closest to communities, convene partners, and are often the only part of the system able to coordinate across public services locally.

The discussion highlighted that the reform agenda should not be seen as a central government project delivered “to” local government; it must be delivered with local government, with the right levers, data, and ability to act across systems.

Takeaway: if 2026 is the year public service reform accelerates, councils must be recognised as core partners with power and capacity, not just responsibility.

4) Health and social care remain the biggest unresolved system challenge. Integration is essential, but hard.

The panel spoke frankly about the continuing crisis in health and social care, and the way it impacts local government both financially and operationally.

There was a strong focus on the need for integrated health and social care partnerships, and the importance of aligning incentives across the system. But the conversation also acknowledged how difficult integration is in practice, particularly when:

• budgets are under pressure,
• demand is rising,
• and accountability is fragmented.

The message was clear: without serious progress on integration and prevention, the system will remain stuck reacting to crisis, rather than shifting resources upstream.

Takeaway: health and social care reform remains urgent and councils will continue to feel the consequences until integration becomes real in delivery, not just rhetoric.

5) Digital transformation (including AI) is a major opportunity, but it must be grounded in trust, standards and capacity.

Finally, the panel looked at the growing role of digital transformation — including the potential for AI and better data use to support improved decision-making, efficiency and service design.

The discussion emphasised that this isn’t just about technology procurement, it’s about:

• shared standards
• stronger governance
• building the right capabilities
• and ensuring the public can trust how data is used.

There was also discussion of practical examples, including digital work around planning and the wider challenge of improving systems so that councils can deliver better outcomes more efficiently.

Takeaway: the potential is huge, but digital change must be underpinned by strong governance, workforce capability, and public trust; otherwise, the opportunity will be missed.

Final thoughts

As the panel discussion showed, 2026 is shaping up to be a defining year for local government — with major developments expected across devolution, reform, finance and service delivery.
But the sector will need more than momentum. It will need clarity, capacity, and a reform agenda that recognises local government as a key part of the solution — not just the delivery mechanism for difficult decisions.

2026 Polling Results

We asked the audience for their take on the year ahead. For comparison, we also have the results from last year’s event.

What are the top three priorities for local government for 2026?

1. Improving the financial sustainability of the sector
2. Tackling the housing and homelessness crisis
3. Growing the local economy

VS. 2025

1. Improving the financial sustainability of the sector
2. Tackling the housing and homelessness crisis
3. Investing and transforming infrastructure and services / Adoption of artificial intelligence and future technologies / Tackling public health issues

What are the top three priorities for local government for the future?

1. Responding to demographic changes
2. Growing the local economy
3. Improving the financial sustainability of the sector

VS. 2025

1. Adapting to and mitigating climate change
2. Investing and transforming infrastructure and services
3. Improving the financial sustainability of the sector

On a scale of 1 to 10, how optimistic are you about the future of local government?

2026

Vs 2025

In one word, what does the council of the future look like to you?

2026

Vs 2025