At the turn of the 20th century, local government was the engine of national renewal. As cities swelled under the weight of rapid industrialisation, councils built vast housing developments that moved hundreds of thousands of citizens out of slums, overhauled public-health infrastructure and laid the foundations of the modern welfare.

A century later, while the challenges are just as urgent – an ageing population, a housing crisis and mounting pressures on public health – this engine is stuttering to a halt. By 2029, local government in England will need an additional £16 billion to deliver services compared with 2020. Many councils are risk averse when it comes to innovation – even as they are asked to do more for less. So, amid these pressures, they have reduced access to services through lengthy waiting times, dipped into dwindling reserves and redirected resources to meet demand for statutory services. And still the backlogs grow.

The limits of the existing operating model have been reached. Starved of resources by cuts inflicted by previous governments over the past 15 years, many councils are on the verge of bankruptcy even though local taxes are at their highest level. Residents wait too long for care, too long for planning applications and too long for benefits; many people never receive what they are entitled to. Public satisfaction with local services is sliding.

Today, however, there are new tools – enabled by artificial intelligence – that would allow councils to tackle these challenges. The day-to-day tasks of local government, whether related to the delivery of public services or planning for the local area, can all be performed faster, better and cheaper with the use of AI – a true transformation not unlike the one seen a century ago.

These tools would allow councils to overturn an operating model that is bureaucratic, labour-intensive and unresponsive to need. AI could release staff from repetitive tasks and relieve an overburdened and demotivated workforce. It could help citizens navigate the labyrinth of institutions, webpages and forms with greater ease and convenience. It could support councils to make better long-term decisions to drive economic growth, without which the resource pressure will only continue to build.
In our Governing in the Age of AI series of publications, the Tony Blair Institute for Global Change argues that AI offers a transformative pathway for reimagining how the state works, making governments more efficient, transparent and agile. Our first paper, Governing in the Age of AI: A New Model to Transform the State, set out the benefits of harnessing AI in the centre of government. Our subsequent paper, Governing in the Age of AI: Reimagining the UK Department for Work and Pensions, used bespoke analysis to estimate the time savings that embedding AI could deliver for the department. In this paper, we examine how AI could help reimagine local government.

To understand the potential, TBI partnered with one local government to map the tasks that were performed by its staff to our unique database of 19,000 tasks ranked according to the potential impact of AI. The analysis showed that using AI could automate or improve at least 26 per cent of tasks – or one million hours of work per year – which is equivalent to a productivity gain of £30 million per year.

If similar gains were achieved at national scale, we estimate an annual time saving worth £8 billion across local authorities in England and Wales, equivalent to 380 million hours and £325 per household. Councils could use these savings in several ways, including improving the speed and quality of services, reducing pressures on the workforce, bringing services back in house and moving towards a more preventative service model.

Councils – operating at a smaller scale than central government – are well placed to test innovative tools and services, becoming the nation’s innovation lab for public services, but this transformation will not happen without support. Increased centralisation of policy and operational decision-making over the past 40 years has coincided with the neglect of the operational and delivery role of local government. In addition, organisational siloes within and between local governments, as well as limited market power to challenge incumbent technology providers, increase the cost of change.

As a result, councils lack the confidence, capabilities and infrastructure required to unleash this innovation. While some councils – such as Newham, Hertfordshire, and Hammersmith and Fulham – are innovating with AI, mechanisms are not in place to scale these initiatives across the country.

The government has proposed creating unitary authorities – single entities responsible for all local-government services in their area, rationalising the complex system of overlapping local authorities that currently exists – and devolving more power to local areas. These are important steps in transforming local government and a critical opportunity to ensure it delivers for citizens.

To make the most of this moment of change, TBI is calling for the creation of a new institution: the Devolved AI Service (DAIS). DAIS would act as a co-operative platform for local government to support fast, frugal innovation. It would provide the vision and governance for local innovation, build and incubate local AI tools and services, transform the infrastructure for scaling innovation and improve local capabilities.

With seed funding from the Department for Science, Innovation and Technology and the Ministry of Housing, Communities and Local Government, DAIS would in the medium term transition to self-sufficiency, sustained through a subscription model. In the longer term, it would develop a funding stream by monetising international access to tools and services. The first local authorities and related organisations to join DAIS should become test beds, adopting three bold flagship programmes:
that rely on locally held data, such as housing benefits. Data from this tool could be used to enable service redesign and target interventions. TBI estimates that AI could save one-and-a-quarter days per week of additional time for staff in these citizen-facing roles.

Introduce a data and decision-making platform for local-plan development and an AI Planning Assistant to streamline the planning process. These tools would create good-quality and dynamic local plans, streamline the application process for citizens and improve the quality of decision-making for applications. TBI estimates that AI could free up almost two days per week for housing and economic planners.

These new services must be both effective and safe. DAIS should make sure these tools are responsibly adopted, including through the use of TBI’s PEARS framework, as set out in A New Model to Transform the State, to ensure decisions made with support from AI systems are predictable, explainable, accountable, reversible and sensitive.

In addition to establishing DAIS, there are reforms that councillors can pursue immediately: championing AI innovation, adopting tools that have been proven to work, coordinating with leading local authorities and other stakeholders to share best practice, adopting data standards, and adapting the workforce and attracting the right talent.

Through these interventions, local government can regain its ability to transform communities and drive economic growth. Instead of firefighting immediate crises, councils can refocus on long-term priorities – building vibrant, resilient local economies and delivering meaningful improvements to citizens’ lives.