One year in: What the Labour government means for local authority funding

Twelve months into Labour’s return to government, local authorities continue to juggle financial constraints. But efficiencies are available to free up valuable resources…

As the UK Labour government marks its first year in office, local authorities across the country are closely watching how policy shifts will impact their funding, budgets, and ultimately, their ability to deliver vital frontline services. While political priorities have certainly shifted, local councils continue to feel the effects of years of financial strain—and the pressure to do more with less has never been greater.

A historic funding gap

To understand the current situation, it’s important to look back. Over the last decade, UK local authorities have faced deep and sustained cuts to their core funding. Austerity measures implemented post-2010 saw council budgets slashed by more than 40% in real terms, while demand for services – from adult social care to housing and children’s services – continued to rise. This created a widening gap between what councils were expected to deliver and the resources they had to do it.

Fast forward to today: despite promises of increased funding, many local authorities are still playing catch-up. The new Labour government has signalled its intention to support local government reform and invest in public services, but the pace of change has so far been cautious. Inflation, rising energy costs, and workforce pressures continue to drain budgets – and the latest funding settlements, while welcomed, often fall short of what’s required to plug years of underfunding.

Frontline services under strain

The real-world impact is clear. Councils are being forced to make difficult choices as they attempt to balance budgets while protecting essential services. Frontline areas are bearing the brunt of the squeeze:

• Adult and children’s social care
• Temporary housing
• Waste collection
• Public health
• Transport and road maintenance

As a result of these pressures, many authorities are now dipping into reserves or exploring asset sales just to stay afloat.

Finance teams are under immense pressure. Balancing statutory responsibilities with rapidly rising costs is like walking a tightrope. Every spending decision must be justified. Every cost-saving opportunity scrutinised. And all of this in a context where even small missteps can tip a council into deficit.

The case for spend management

In this environment, getting a clear grip on spending is not just important – it’s essential. Councils need real-time visibility into their finances, tighter control over expenditures, and the ability to forecast more accurately. That’s where automated spend management solutions come into play.

The right spend management solution can make a big difference quickly. By automating expense reporting, invoice processing, and travel management, councils can:

• Eliminate inefficiencies in manual processes
• Gain near-real-time financial visibility
• Ensure compliance and policy adherence
• Track who’s spending what, where, and why
• Free up staff time for more strategic work

In fact, our guide, Filling the void: How digital transformation can help local authorities fill the gaps created by under-pressure finances and funding, sets out exactly how your organisation can leverage digitalisation to begin seizing these benefits today.

And, importantly, these solutions aren’t prohibitively expensive or time-consuming to implement. SAP Concur’s approach means councils can start small, prove value, and grow their usage over time. Many organisations report seeing a return on investment in months – not years.

A smarter path forward

The financial pressures on local government are unlikely to ease overnight. But while councils may not be able to control their funding allocations, they can control how well they manage the money they do have. Now more than ever, investing in digital transformation and streamlining processes is a strategic move – not a luxury.

Spend management might not solve every challenge facing local government finance teams. But it is a critical first step towards resilience, efficiency, and sustainability. And it’s a step that local authorities can take today.

• Learn more about how your organisation can benefit from the right spend management solution, by accessing our infographic: 6 ways digital transformation can help boost local authority finances.