Time to let local government actually govern
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As MPs return to Parliament, Westminster’s immediate focus shifts to the upcoming local elections. Across the country, polling stations will open, ballot boxes will be wheeled into church halls and primary school gyms, and voters will be asked to choose their local representatives. Roughly 70% of us won’t exercise that democratic right.
This is not, in itself, surprising. Nor is it proof of democratic decline. But it reflects something more specific: British local democracy is, in practice, among the dullest and least empowered forms of government in the developed world.
We continue to refer to it as “local government,” but that’s generous. In reality, it’s local administration. The job descriptions are ambitious—housing, care, education, planning—but the tools provided would embarrass a medium-sized charity.
And yet, those who serve on these councils—councillors, officers, community leaders—are often among the most conscientious and hard-working public servants in the country. The problem is not capacity. The problem is constraint.
But even if we gave them the tools, not every council would be ready. The past decade has shown us that some local authorities simply aren’t up to the task. Birmingham is the starkest example—effectively bankrupt and unable to meet its obligations. Northamptonshire, Croydon, Thurrock: all variations on the same theme.
Local failure is real. But so is central government failure. HS2 stands as one of the most wasteful, incoherent infrastructure projects in recent memory. At the heart of this is a deeper question: who is best placed to deliver infrastructure? Yes, we need national oversight for projects like airports, ports, and the motorway network. But infrastructure also lives at the local level—in housing, transport, schools, and digital connectivity. And this is where the UK is failing most profoundly.
Nowhere in the G7 is local government more financially limited than in the UK. This is not the result of global forces or economic necessity. It’s the outcome of decisions taken—and sustained—at the centre.
In terms of national debt, the UK is one of the most fiscally orthodox countries in the G7, with debt just under 100% of GDP—below the G7 average. But dig a little deeper, and that prudence disappears when it comes to local government.
Local council and devolved authority borrowing in the UK currently stands at just 1.5% of GDP. In Canada, the US, and Germany, it’s closer to 12–14%. These aren’t reckless outliers—they’re mature systems built on the sensible belief that local governments are often best placed to lead local investment.
Meanwhile, Britain remains fixated on Whitehall—even as our infrastructure crumbles and growth stagnates. If we allowed councils to borrow up to the G7 average, we could unlock £265 billion in capital investment. Enough to fund the transport upgrades, social housing, green infrastructure, and regeneration projects that have spent the last decade stuck on drawing boards.
It’s a truly transformative amount of money—and could be unlocked with the flick of a switch. Instead, we keep the tools locked in the Treasury cupboard—and tell councils to make do.
Rachel Reeves entered the Treasury with a reassuringly orthodox set of fiscal rules: debt must fall as a share of GDP within five years; day-to-day spending must be funded through tax revenues; borrowing is permitted only for capital investment.
These are not unreasonable principles. But Reeves now finds herself in a familiar trap. She cannot cut further without sparking rebellion from Labour’s base—as seen in the backlash over proposed incapacity benefit reforms. She cannot raise taxes without breaching manifesto promises or spooking markets.
And so, like many of her predecessors, she risks becoming the greatest threat to her own rules by clinging to them too rigidly. Hands tied, no options. Or so it seems.
But there is another way. A way to stay within those rules—not go around them—and still fund the investment Britain badly needs. Borrow to build—but do it locally.
Let councils borrow. Not to plug social care gaps or balance day-to-day budgets—but for capital investment. For homes. For infrastructure. For transport and connectivity. For clean energy, digital systems, and community renewal.
These are not vanity projects. Nor are they gambles. Done properly, they generate growth, expand the tax base, and reduce future costs. The returns may be long-term—30 to 50 years—but they are real.
This approach fits comfortably within Reeves’s rules: capital borrowing, growth-generating. And by channelling it through a central oversight body—like Germany’s KfW or the Canadian Infrastructure Bank—it can align local initiative with national strategy.
This is not a Trojan horse for devolution. It’s a simple, pragmatic acknowledgment that local leaders often know better than Whitehall where to put a tram stop or build a housing development.
It would also help solve one of British finance’s great frustrations: the chronic underuse of pension funds. The UK has over £2.5 trillion in pension assets. Yet less than 1% is invested in infrastructure. In Canada and Australia, it’s closer to 10%.
The reason is straightforward: we lack a steady pipeline of long-term, inflation-linked public projects.
Empowering councils to borrow—under sensible rules—would change that. It would give pension funds access to secure, socially valuable assets. It would finally bridge the gap between individual financial security and national ambition.
We talk a lot about devolution in this country. But what we have looks more like delegation. Councils are told what to do, given inadequate resources, and then blamed for the outcome.
This doesn’t just breed inefficiency. It breeds cynicism. Voters switch off. Talented councillors walk away. Ambitious professionals look elsewhere. Local democracy becomes a management meeting with ballot papers.
If Reeves wants to deliver on “securonomics”—growth with resilience, fiscal discipline with strategic intent—she must accept that government doesn’t stop at the M25.
This doesn’t require a grand national strategy, a referendum, or a theory of the state. Just a modest, grown-up shift in fiscal imagination: let councils borrow to build, within the very rules Reeves has already laid out.
The cost of doing nothing is not just economic. It is civic. It is the slow erosion of trust in the public institutions closest to our lives.
The renewal narrative of the Starmer-Reeves government begins when they unlock the tools they already possess—and finally let others use them too.
The question is: do they have the imagination—or the ambition—to realise this?
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