Britain’s public finances are under pressure. That much is no longer seriously in dispute. The Office for Budget Responsibility warned in July that UK public finances are heading towards an unsustainable long-term path in most scenarios, while the Institute for Fiscal Studies has described a familiar but uncomfortable backdrop of high debt, high borrowing costs, rising taxes and public services already under strain.
The short-term picture is not much easier. UK government borrowing costs have recently climbed to levels not seen since before the financial crisis, tightening the fiscal room available to ministers ahead of the next Budget. For local government, the pressure is even more visible. The Public Accounts Committee has described council finances as being in a “perilous state”, with growing demand for social care, special educational needs and temporary accommodation squeezing the everyday services people notice most such as parks, leisure, street cleaning and lighting.
The point is not to rehearse a gloomy set of numbers. Most businesses, councils and local leaders already know the fiscal context. The more important question is what it means for places.
One tempting but wrong answer is to ask local government to do more with less forever. Another equally flawed response is to assume the private sector can simply step in where the state retreats. That risks reducing partnership to outsourcing, or reviving the worst instincts of old-style public-private finance, where accountability becomes blurred and long-term value is uncertain.
The better answer is more practical. In a period of fiscal constraint, places need to become better at using all the capacity available to them. That means public authorities, businesses, colleges, universities, health bodies, developers, voluntary organisations and civic institutions working around shared outcomes: better jobs, healthier workforces, stronger town centres, more resilient supply chains, improved skills and lower long-term demand on crisis services.
This is not about replacing the state. It is about recognising that the state cannot shape places effectively if it acts alone.
Procurement is one obvious place to start. Councils and public bodies spend large sums each year buying goods, works and services. In a tighter fiscal environment, that spending has to work harder. The Local Government Association describes social value as using procurement to achieve wider economic, social and environmental outcomes, including local employment, training and supply-chain opportunities. It also notes that councils are looking at how to make limited resources go further while maintaining the quality and breadth of services.
Used well, this can turn procurement from a narrow buying function into a place-shaping tool. A construction contract can support apprenticeships. A facilities contract can open opportunities for local SMEs. A regeneration project can build local training into delivery from the start. But social value has to be real, measured and managed. If it becomes a few warm words in a tender document, it will not survive the coming squeeze.
Business Improvement Districts offer another practical example. BIDs are business-led partnerships, created through a ballot, where eligible businesses pay a levy to fund additional services or improvements in a defined area. Government guidance describes them as a way to deliver extra services to local businesses, above what councils ordinarily provide.
BIDs do not replace councils, and nor should they. But at their best they give businesses a formal stake in the quality of the places from which they trade. In town centres and employment areas, that can mean better marketing, events, safety initiatives, street management, environmental improvements and a stronger voice for local firms. When public funding is tight, that kind of organised business participation matters.
The same logic applies to skills. A skills system designed without employers risks wasting public money on training that does not lead to work. A system designed only for employers risks becoming too narrow. The answer is partnership around public funding, employer demand, college delivery and clear routes into jobs.
Skills Bootcamps are one example of that approach. Government describes them as employer co-designed, flexible courses of up to 16 weeks, with eligible participants offered a job interview at the end. Sector-based work academies work on a similar principle, bringing Jobcentre Plus, colleges, training providers and employers together to meet recruitment needs while giving participants sector-specific training and a guaranteed interview or recruitment support.
This matters because skills are not just a labour-market issue. They are fiscal policy. When people move into work, stay in work or progress into better-paid work, the benefits are felt in household incomes, business productivity, tax revenues and reduced pressure on public services.
That link between work, health and public finances is becoming harder to ignore. WorkWell, now being expanded nationally, is designed as an integrated health and employment support service for people with health-related barriers to work. It brings together Integrated Care Boards, local authorities, Jobcentre Plus, employers, skills services and voluntary organisations around locally designed support. This is exactly the kind of model that deserves more attention. If ill health is one reason people leave the labour market, employers are not bystanders. They are part of the prevention system. Earlier support, better occupational health, flexible work, retraining and joined-up local services can help people remain economically active. That is better for individuals, better for employers and better for the public purse.
There is also a capital investment question. In an era when public money is constrained, public funding has to be catalytic. The aim should not always be for the state to pay for every element of delivery directly, but to use land, planning, guarantees, convening power and limited public capital to make difficult projects investable.
The National Wealth Fund’s partnership with Greater Manchester’s Good Growth Fund is a useful example of the direction of travel. It is intended to help identify and invest in projects with the potential to attract private capital, so that public investment goes further and supports sustainable growth across the area. That principle could apply more widely to regeneration, clean energy, housing, transport-adjacent development, employment sites and town-centre renewal will increasingly depend on the public sector’s ability to unlock private capital rather than substitute for it.
The places that succeed in this environment will be those that can organise partnership seriously. That means more than consultation exercises, business breakfasts or glossy strategies. It means knowing where private capability can improve delivery, where public accountability must remain firm, where voluntary and civic organisations understand needs best, and where prevention is cheaper and better than crisis response.
There are risks. Partnership can become a vague word that hides weak accountability. Social value can become performative. Business involvement can privilege louder voices over broader local need. Private finance can be expensive if badly structured. None of this should be romanticised. But the fiscal position leaves little room for complacency. If public finances are tight, borrowing is expensive and demand on services keeps rising, then local and regional leaders need a more serious operating model. Businesses cannot be treated only as taxpayers, consultees or occasional sponsors. They shape labour markets, high streets, health outcomes, supply chains, skills demand and investment confidence. They need to be part of the delivery system.
The task is to do that without confusing partnership with abdication. Public authorities must still set priorities, protect public value and be accountable for outcomes. But they also need to become better conveners, commissioners and market-shapers. In many places, the future will depend on the ability to turn public authority, private capability and civic purpose into practical delivery.
The fiscal squeeze will not be solved locally. But its consequences will be felt locally. That is why the response has to be place-based.
The next decade will reward places that can do more than ask Whitehall for help. It will reward those that know how to align employers, councils, colleges, investors, health partners and communities around shared problems and measurable outcomes. Not because partnership is fashionable, or because business should take over from the state, but because the old model is running out of road.
When the state is stretched, places need new partnerships. The challenge now is to make them serious enough to matter.
