State of Digital Local Government

Local government forms the backbone of the public sector, delivering essential services to every resident and collaborating with nearly every other department and public entity. Despite facing significant financial constraints with shrinking budgets and rising demand, councils nationwide are embracing digital transformation to address these challenges and meet increasing resident expectations.

The Blueprint for Digital Government is not just about technology; it's about transforming how we work and how we serve our citizens. It's about empowering our communities to take control of their lives and shaping the future of our country. Local government is at the heart of delivering a modern, digital UK, and is critical to achieving Government’s ambitions of delivering transparent, next generation public services, boosting productivity and efficiency, and achieving inclusive economic growth. We are uniquely positioned to understand and respond to the needs of our communities, and are fundamental to joining up public services and strengthening our data and digital infrastructure.

At the LGA we have been listening to, supporting, and advocating for the local authorities who are facing these challenges with resilience, creativity, and innovation. This report outlines the breadth of the opportunities and challenges distinct to the local government digital landscape, and paints a picture of a sector preparing to embrace a radically different future. It also demonstrates why we need a fundamental reset to how digital local government is supported.

In the run up to the 2024 General Election, we published our Local Government White Paper which sets out councils’ urgent priorities for a returning or new government. In it, we called for the establishment of a Local Government Centre for Digital Technology (LGCDT); one which uses technological innovation to deliver reform and promote inclusive economic growth across councils. The LGCDT presents a paradigm shift. It envisions a future where Local Government fully leverages digital tools, to empower communities and drive economic growth, aligning with the Government’s agenda for public sector reform. Local Government is not simply a mini-Whitehall. Too often Government will develop approaches centrally and assume it will fit elsewhere. Time and time again we’ve learned this does not work. Local Government needs a new devolved operating model, and a Local Government Centre for Digital Technology would enable engagement, coordination and impact.

Local Government stands ready with our experience, expertise, and connections to communities to work with Central Government and the private and voluntary sectors to find innovative and sustainable solutions to the issues facing digital transformation and deployment across the country.

Cllr Louise Gittins, LGA Chair

Cllr Abi Brown OBE, LGA Conservative Group Deputy Leader

This report is themed around four inter-related areas on the state of local government digital: market concentration, service delivery, technology, and delivery capabilities.  It is particularly challenging to assess the current state of digital transformation in local government, given the diversity of experience, resources and lack of consistent data collection on digital transformation and technology estates. 

This report is informed through our regular and extensive engagement with local government, primary research carried out by the LGA, and the research of stakeholders. It is worth noting that research on market concentration is challenging as it is a highly sensitive area.

Key messages:

1. Local Government is a vital part of the public sector innovation ecosystem. Local government needs their priorities and context to be understood within cross public sector digital transformation ambitions through representation on public sector strategic boards and subsequently integrated into the design of public sector guidance and cross-government products at the earliest point. This will reduce the likelihood of duplication at public expense. Local government must also have equivalent access to training as civil servants. 
2. The Local Government Centre for Digital Technology (LGCDT) will help empower collective digital transformation: The LGCDT will support the empowerment of local authorities to harness the potential of digital technology, driving innovation efficiency and improved services for communities across the UK. The LGCDT will provide a collaborative focus for local authorities, central government, industry experts and community stakeholders, to address unique challenges and opportunities facing Local Government in the digital age. By sharing knowledge, co-creating solutions, and driving innovation, the LGCDT will enable local authorities to overcome shared challenges, and unlock new opportunities through collective action. 
3. Procurement, assurance and open markets: Coordinated assurance and compliance from the centre must be prioritised to foster trust in technology. An enhanced role for Public Buying Organisations (PBOs), such as Crown Commercial Services, other local government led PBOs or the Central Digital and Data Office should be considered in consultation with local government information and cyber security specialists, to ensure this assurance is done centrally – saving resources and capacity for councils as buyer, and for vendors. To address concerns regarding market dominance by a few suppliers, more must be done to foster competition, particularly for SMEs, and local government is seen as a vital vehicle for making this happen. The LGCDT could support the coordination of better strategic supplier management for councils and must be considered within the Government’s current initiatives.
4. Promoting public sector reform. The LGCDT will support public sector reform by advocating for the needs and interests of Local Government in national policy discussions, ensuring that their perspectives are heard and considered. It will contribute to the development of national policies and regulations that support local government digital transformation, ensuring they are practical, effective and reflect local needs.
5. Integration of digital inclusion: The LGA welcomes DSIT’s renewed prioritisation of digital inclusion. It’s vital that central and local government continue to work together towards shared objectives, local and hyper local approaches are well resourced, and inclusion is integrated effectively with other digital transformation objectives, particularly connectivity programmes.

Local government forms a significant part of the public sector, with £121 billion annual spend and a workforce of 1.18 million – second only to the NHS. Local Government is responsible for a range of vital services for people and businesses throughout the UK, interacting with every household in Britain at different points of the lifecycle. Services include support to the most vulnerable in our society through adult and children’s social care, and housing, as well as schools, licencing, business support, registrar services and planning. Each Council has their own democratic mandate for delivering local services. Local government today comprises 317 councils in England with almost 18,200 elected councillors.

Councils hold a unique position within the public sector technological eco-system where they hold information on every resident, exchange data with nearly every branch of government, and enable the digital economy in the places they serve. As a result, they and a Local Government Centre for Digital Technology play a pivotal role in driving technological progress in every part of the country and driving growth in the technology sector.

The structure of local government varies from area to area. In most of England, there are two tiers – county and district – with responsibility for council services split between the two tiers. Since the passing of new legislation in 2009, there is an additional type of regional authority, Combined Authorities, where two or more councils collaborate and make collective decisions across council boundaries.

One (Unitary) tier:

Two tier:

Local governments in England face a severe funding crisis. A 6.2 billion funding gap over the next two years, coupled with a 31.5 per cent reduction in staff over the past 12 years, has resulted in significant pressure on essential services exacerbated in recent years by post-pandemic trends. This has led to:

• Prioritization of statutory services: Spending is concentrated on areas with legal obligations, while preventative and community services like youth clubs and libraries face cuts¹. Councils have also been forced to sell land, buildings, and capital assets to prevent bankruptcy².
• Growing demand for acute services: Rising needs in adult social care, homelessness support, and special educational needs are further straining resources³.
• Workforce crisis: Councils struggle to recruit and retain staff due to salary competition and increasing workloads.
• Inequitable impact: Deprived areas, which have the highest needs and therefore the greatest demand for council services, have been disproportionately affected by funding cuts⁴.

The consequences of this crisis are stark: declining service satisfaction, 1 in 4 councils will need emergency bailouts from Government, and there is potential for further cuts to vital community services. While council tax has risen slightly, it has not kept pace with inflation and the growing demand for services. In the wake of reducing budgets, councils have sought funding through competitive funding bids, which comprised a quarter of funding streams to local government. Bids can cost up to £20-30,000 to complete.

A foundational issue to all of the areas in the SDG review for local government is the concentration in markets of many of the systems that underpin the delivery of vital services, such as adult and children's social care case management systems, electoral software, revenues and benefits systems, and planning back-office systems. Although each of the 317 councils in England operates independently. The fragmented nature of local government technology purchasing makes it difficult for councils to collectively bargain for better prices, value, or more innovative solutions.  This is why it is vital that a Local Government Centre for Digital Technology is established to support collective purchasing and innovation.

Central/coordinated negotiation: While the LGA has made efforts to represent councils' needs in national negotiations with major suppliers like Microsoft and VMware, a national approach is rarely taken with ‘legacy suppliers’, solely serving local government. Some government departments, such as the Department for Education and the Department for Health and Social Services, have taken steps to address market dominance challenges in specific areas like social care systems. However, these efforts remain ad hoc and limited in scope. Local Government specific suppliers are often omitted from central government’s strategic supplier relationship management, such as the Central Digital and Data Office’s strategic supplier relationship management programme, and the Cabinet Office’s Crown Reps. This is arguably due to the supplier not meeting the cost threshold defined by central government. A broader definition of ‘strategic’ is required to include data risk, number of customers, and/or challenging negotiations.

Capacity and capabilities asymmetries: These challenges are exacerbated by varying levels of capacity and expertise in council procurement, legal and IT teams. Some councils have dedicated IT procurement specialists who can negotiate effectively, while others have small procurement and IT teams who may lack the capacity and capabilities to negotiate with global companies, resulting in a significant power imbalance and less buying power. Council legal teams may also be overstretched, and councils choose to purchase through frameworks such as Gcloud as the contract work is already done. However, the terms and conditions are not always aligned with a council’s requirements and security requirements are minimal. It is also worth noting that information asymmetries often exist between global suppliers and the whole public sector which can impact negotiations due to the lack of data regularly collected on contract timeframes and supplier contractual relationships across local government. 

Inconsistent pricing: Market dominance has led to instances of price variances and anecdotal reports of price gouging. When software updates are required to meet policy changes or security standards often at short notice, the costs can often be passed directly to individual councils, resulting in a higher overall cost to the public purse.

Data interoperability: Given the breadth of services that councils provide to every citizen in the UK, councils hold a wealth of data on each resident. However, it is challenging for councils to ensure that systems and data are interoperable due to barriers by legacy suppliers⁴ and/or the high costs of APIs which significantly hinder digital transformation.

Vendor lock-in: Long-term contracts, high exiting costs and a lack of suitable alternatives can create vendor lock-in, making it difficult and expensive for councils to switch suppliers even if they are dissatisfied with the service or offerings. For example, in the revenues and benefits market, a local government led market disruption system has been piloted and is currently under Beta development. Despite the challenges faced with the revenues and benefits suppliers, the cost of exiting could be up to £300,000 per council.⁵

Compliance with statutory duties and adherence to a council’s security controls: Due to power imbalances that often exist between councils and major suppliers, it can be challenging for councils to drive compliance assurance with data protection laws, the public sector equality duty and a council’s preferred security controls. No single software security standard exists across the public sector, and councils create their own security assurance questionnaires. These must be completed individually by suppliers, creating barriers to entry for SMEs, and processed and analysed by individual councils. These assurance questionnaires rely solely on self-assessment by the supplier which can be challenging to verify and relies on trust with some of the most vulnerable people’s data in the UK. There are also challenges faced in driving compliance from suppliers with accessibility legislation. Often suppliers will ‘tick the box’ but not undertake the subsequent changes to the system required leaving a council accountable for their non-compliance, and perpetuating exclusion of vulnerable residents.⁶

Cyber incident cooperation: In the LGA’s support to councils experiencing a supplier cyber incident/data breach last year, a common lesson identified was that councils lacked the necessary leverage to compel the supplier to continue to cooperate with the council throughout its forensic investigation. This often involved highly sensitive data of vulnerable residents, and the lack of cooperation prevented the council from carrying out its statutory duties to care for residents involved. Due to a lack of suitable other options, and high exiting costs, the council often had no choice but to remain with the supplier despite concerns.⁶

LGCDT intelligent procurement: The LGCDT as envisaged has an intelligent procurement operational function, which would analyse technology markets, facilitate collective bargaining, and collectively procure products and services for individual councils to use. This would address market failures, improve value for money, and enable innovative procurement practices that promote localised economic growth and productivity. 

Digitalised services: Local authorities provide over 800 services across the country that are the front line of government service delivery and have been increasingly digitally transforming service delivery. This trend has been intensified by increasing demand and rising public expectations for 24/7 service, and digital access to council services. Service design in local government is increasingly being delivered with ‘digital first’ in mind, as digital technology is seen in local government as a key enabler of transformation and efficiencies at a time when local government is under continued and ever-pressing resource constraints.  

However, councils are also aware that many of their service users are digitally excluded, and therefore ‘digital first not digital only’ is vital and alternative pathways for service access must be retained. To support councils with service design best practice, the LGA and Local Gov Digital have been consulting the sector to update the Local Government Digital Service Standard. 

Customer experience: Customer experience has been an increasing focus for councils as many existing digital services are understood to not optimise the customer journey. There is extensive work going on in councils to improve customer experience, such as through customer experience governance boards, the development of resident experience strategies, and programmes to drive improvements in citizen interactions with councils and move to more citizen centric service delivery models. Councils often have customer experience as a core part of their key performance indicator which takes the whole issue out of the silo of the ‘customer service department’ and makes it a wider corporate deliverable that is part of everybody’s objectives and responsibility.

Digital front door and back-end interoperability: To improve resident experience and efficiency, many councils are implementing online platforms like 'MyAccount' and aiming for unified customer contact systems to support a single view of the customer. This is to provide a one-stop portal for residents to engage with their council and undertake more service applications online which frees up demand for call centres, improves resident experience, and addresses rising demands. However, achieving interoperability between back-office systems remains a challenge due to legacy systems, API barriers, and a lack of data standards. While the LGA undertook a discovery for local government with the Government Digital Service on 'One Login'⁷, its design focused on central government services, proved unsuitable for the horizontal service structure of local government, highlighting a missed opportunity for resource and cost savings.

AI and the emerging technologies: While councils are enthusiastic about the potential of AI, Robotic Process Automation (RPA), and smart and geospatial technologies to improve services and efficiency, they face challenges to deployment, including limited capacity, capabilities and funding constraints. Emerging technology use also risks perpetuating the sector digital divide as not all councils can avail of opportunities equally. Despite these barriers, AI is being adopted to enhance staff productivity, service efficiency, and cost savings, with RPA demonstrating notable cost reductions when implemented by in-house teams. The LGA is actively supporting councils in this area by showcasing innovative technology solutions, facilitating access to SME suppliers to counter the dominance of a few large vendors and producing guidance on safe and ethical deployment in collaboration with key regulators.

Digital inclusion and resident engagement: The Equality and Human Rights Commission notes in their analysis of digital services, that an increasing focus on digital services can risk discriminating against and excluding people who cannot access them. Local Government has an enhanced responsibility through regulatory standards to ensure that digitisation does not lead to exclusion, however, reduced resources, and lack of financial support for digital inclusion programmes are weakening local government’s ability to fulfil these duties. Across local government, there are excellent examples of work to bridge societal divides by ensuring inclusive access to technology. Initiatives like public Wi-Fi zones, digital literacy programs, and accessible online services can democratise technology access. Such inclusivity is vital for empowering marginalised and underserved groups, allowing them to participate fully in the digital economy and society. Moreover, digital platforms can facilitate community engagement and participation in local governance, enabling citizens to voice their opinions, access information, and engage with their representatives more effectively. The LGA continues to support digital inclusion officers and programmes across the country and welcomes the establishment of a new digital inclusion team within DSIT. Future effective and high-quality digital service provision is reliant on digital inclusion, and this is a vital area of focus for the LGA to ensure that all communities can realise the benefits of digitally enabled services.

The LGCDT would further drive a co-ordinated and inclusive digital-first transformation across services, which could support councils to leverage support and resources to enhance customer experience and empower councils to harness the full potential of digital technology. The Digital Innovation Lab operational function would serve as a sanctuary for Local Government to experiment with new technologies and service models. The lab would de-risk innovation by providing collective funding, technical expertise, and a controlled testing environment. This would empower local authorities to explore solutions with high potential for scalability and transferability across the sector, leading to faster adoption of successful innovations.

Technology investment and legacy systems: Councils hold a significant legacy estate across the sector, which can be a significant barrier to productivity and digital transformation. In some cases, these are difficult to modernise in contexts of market concentration with little supplier incentive to improve⁸. In other cases, it can require significant investment to update, which in the current funding context, is challenging to justify with high levels of in-year savings. Over the past fourteen years, councils have been encouraged to apply for digital transformation projects through competitive funding rounds. These have been highly competitive and have always funded new initiatives rather than maintenance. There are also reports from councils of difficulties in undertaking "whole system modelling" and the tendency for digital business cases to focus on narrow IT needs rather than cross-cutting impacts⁹.

Scalable innovation: Councils are proud to be independent organisations, serving the needs of their local communities and responsive to their residents. However, there are systems and services that are being delivered across 100s of councils in the same way. There hasn’t been enough support to councils on innovation solutions that could be scaled up and replicated in other councils, reducing configuration costs per council (where not appropriate) and resulting in savings across the sector.

Shared services: In the context of local government, there are several different models for delivering shared IT services, primarily established to produce cost savings and drive efficiencies. Councils also may establish companies, wholly owned by the council, to provide managed services back to the council, other councils, other public authorities, and/or to micro-enterprises operating locally that would not otherwise be able to afford IT services in the commercial market. In other cases, councils have set up companies to deliver managed IT services as a social enterprise to develop digital skills and grow the local digital economy in their council area. Where councils establish companies, this is often not done to compete with the commercial sector but instead to deliver social value, deliver savings for the taxpayer, and/or to meet community needs where the market has failed to do so¹⁰.

Departmental silos within a council: As complex organisations delivering over 800 services to every resident in the UK, departmental silos are commonplace in councils and can be a barrier to transformation if not addressed through culture and governance. Councils can often struggle to join up services and systems, leading to duplicated efforts and inefficient use of resources. Some councils, such as Brent, have sought to address the silos through an enhanced Technical Design Authority: a governance body that sits within corporate services, chaired by the Head of Digital, attended by key decision makers such as legal, procurement and finance teams, and tasked with making decisions on all new service level applications. Brent’s TDA significantly reduced duplication across service-level applications and resulted in cost savings for the council. 

Data sharing: Councils face challenges in effectively utilising their data due to quality issues, availability limitations, and difficulties in sharing data with other organisations¹¹. These challenges stem from data silos, varying data formats, conflicting data sharing agreements or interpretations, and differing risk appetites among departments. There’s also limited adoption of data standards in systems by suppliers which acts as a further barrier. This fragmented data landscape hinders AI adoption by impeding the development and deployment of AI solutions, potentially leading to duplicated efforts and increased costs.

Cloud first: The Cloud First policy, introduced in 2013, stimulated transformation in cloud technologies and new suppliers. However, a decade on, a large proportion of public sector workloads and data remains on premise. One reason for this is that many councils hold data on legacy systems which is difficult and incurs high costs to migrate to cloud systems. The cost to move to cloud can also be prohibitive for councils given that cloud costs require additional revenue spend, particularly with the pay per data consumption model, in the context of significant reductions in revenue budgets. With the large amount of data involved with cloud migration, it can be challenging for councils who do not have strong data asset management system. There are also several risks associated with cloud systems which could result in councils being hesitant. This is particularly around data sovereignty in cloud systems, and the potential for data to be stored and processed on cloud systems outside of UK and even EU jurisdiction, putting councils at risk of non-compliance with data protection legislation as well as making local government exposed to cyber security risks.

IT and technology workforce capacity: Councils are experiencing challenges with capacity in digital technology in IT staff and highly technical staff. Both recruiting and retaining IT and technical staff is challenging due to private sector pay competition. Approximately 18 per cent of IT posts in councils across England were vacant as of 1 October 2023, and around a third of all responding councils said the vacancy they had found most difficult to fill in the last three years was for a technical /operational /architectural officer. On average, local authority IT teams had a turnover of approximately 9.8 per cent with 70 per cent of respondents saying that the main reason employees were leaving was more pay, while 51 per cent cited better career opportunities and 42 per cent due to retirement. Similarly, across the public sector, councils find challenges with the lack of career opportunities, pathways, and appropriate pay structures for technical staff in comparison with managerial staff in local government. This can hamper attracting talent and retaining staff.   

Digital capabilities across the workforce: Councils also feel challenges across their workforce on digital skills. According to FutureDotNow research, 59 per cent of the workforce are unable to do all basic digital tasks, and 8 per cent of staff are not able to do any basic digital tasks. Based on a workforce of 1.4million, this means that 112,000 don’t have any digital skills, and 826,000 need more training.  The Local Government Capacity Survey (2024) found that a quarter of councils (24 per cent) had a successional training programme in place for their ICT staff.  

Digital leadership: The most recently published Local Government Workforce Survey (2022), found that almost half of councils (48 per cent) reported gaps in the skills of its managers or management teams in relation to supporting digitalisation/use of technology. This was seen as a skills gap that the council would be addressing as a matter of priority (i.e. within the next 12 months) among 15 per cent of councils. In a recent National Audit Office report on digital transformation, it was found that there was a lack of experience and understanding of digital transformation of senior managers tasked with overseeing digital change, and there was a lack of skills and leadership in the civil service which constrained digital change. It is a similar picture of local government. There are many excellent digital leaders and specialists, but wider management teams often lack experience and understanding of digital issues. Resistance by councillors can also be a barrier to digital transformation as was found in 26 per cent of councils.  

Outsourcing vs insourcing: It’s reported that only 6 per cent of respondent councils have an outsourced IT Team. More broadly, anecdotal evidence suggests that councils are bringing services back in house or joining up with their neighbouring councils through shared services. Despite this, councils still have estimated to have spent £545,000 on agency staff/contractors for IT in 2022/23, which is expected to be £698,000 in 2023/24. There is a growing cohort within the sector who wish to nurture more ‘by the sector, for the sector’ development of tools and ensure the capacity is not lost when a supplier or consultant exits. However, in the AI deployment, 24% of respondents to the LGA survey were developing tools in house compared to 71% who were solely procuring. The LGA’s AI Practitioners Network, which currently has 250+ officer members, brings together council developers of tools to share good practice and ideas.  

Digital governance and risk management: Councils strive to have clear and effective decision-making processes in place and any decisions are subject to scrutiny by elected members. However, the governance of digital projects can be challenging, particularly in large councils with federated digital transformation budgets where it’s managed by a service area and not a digital team. There are also evidenced challenges of risk management across leadership in the public sector. Within cyber security, risk management can be a particular issue with evidence from our sector-led consultancy service (deep dives of 28 councils) suggesting that there can be inadequate processes for identifying, assessing, and mitigating cyber risks. Cyber security can often be considered solely IT’s responsibility and not a sharing of the risk across all council departments, and there are challenges around a complete understanding of all information, hardware¹³. 

LGCDT targeted workforce support: The ‘workforce crisis’ that local government is experiencing can and should be tackled by targeted reform and support, and the LGCDT can deliver this offer. The LGCDT will support capacity building across digital local government, and will help grow the expanding appetite for innovation, coupled with agile leadership, which will help foster a culture of experimentation all in the aim of enhancing delivery capabilities in local government.

1. House of Lords (14 March 2024) Local government finances: Impact on communities - House of Lords Library [accessed 12 December 2024] 
2. Unison (September 2024) Councils on the brink: https://www.unison.org.uk/content/uploads/2024/09/Councils-on-the-brink-2024.pdf [accessed 12 December 2024]
3. Institute for Government (22 July 2024) Fixing public services: Priorities for the new Labour government https://www.instituteforgovernment.org.uk/publication/fixing-public-services-labour-government [accessed 12 December 2024]
4. This is widely reported throughout our networks with over 1000+ council officer members on different aspects of secure digitalisation. This was also raised by a number of attendees at the SDG review LGDC meeting. Transcript available on request. 
5. Event: demonstration for open-source Sedgemoor system with over 30 councils attending.
6. Central Digital and Data Office (20 December 2021) Accessibility monitoring of public sector websites and mobile apps 2020-2021 https://www.gov.uk/government/publications/accessibility-monitoring-of-public-sector-websites-and-mobile-apps-2020-2021/accessibility-monitoring-of-public-sector-websites-and-mobile-apps-2020-2021 [accessed 12 December 2024]
7. Reports available on request.
8. LGA analysis of Productivity Plans
9. Jos Creese report. 
10. LGA (no date) Shared services map | Local Government Association [accessed 12 December 2024]
11. LGA analysis of Productivity Plans. 
12. Report available on request. 
13. More details on our Cyber360 (based on the CAF) available here: Cyber 360 | Local Government Association. Report available on request.