Councils turn digital as budget pressures mount
Councils across the UK are ramping up spending on technology and service design as financial pressures mount and demand for services grows.
The Department of Science, Innovation and Technology hopes that digitising public sector services could unlock up to £45bn a year in productivity gains.
“This makes digitisation the most powerful lever available to drive public sector and service reform”, officials wrote in a review.
But while some councils are reporting early savings, sector experts warn that a fragmented approach, outdated infrastructure and leadership gaps are preventing wide scale progress.
A £20m overhaul
In South Wales, Caerphilly County Borough Council has reported £20m in savings after working with transformation consultancy Perago over the past two years.
The partnership focused on redesigning services, streamlining internal roles and making better use of existing software.
“We’ve helped councils identify where they’re overspending and where digital tools can make an impact without buying anything new”, said Victoria Ford, Managing director at Perago.
“In Caerphilly’s case, that meant using what they already had, and focusing on structural design, not just software procurement.”
The council now has a roadmap that could bring the total savings to £65m by 2027 – yet experts warn that these results may not be easily replicated elsewhere.
Peter Corpe, industry leader for the UK public sector a Appian, emphasised the importance of improving processes to enhance public services.
“AI adoption in the public sector is no longer a question of if but when”, he said.
“With millions of hours at stake, automating low-value admin tasks and resolving process inefficiencies offers the public sector a chance to work more efficiently. This means more time for the strategic and value-driven activities that directly impact citizen outcomes.”
A cautionary landscape
Across the UK, public sector digital programmes have been plagued by missteps and misaligned expectations.
The NHS’s now-defunct National Programme for IT cost over £12bn before it was abandoned, and similar attempts to modernise services have often stalled due to a lack of technical skills, poor-quality data, and resistance to change.
Katherine Church, former chief digital officer at Surrey Heartlands NHS, said: “Technology is an enabler, not a silver bullet.”
“Without leadership buy-in and cultural change, even the best digital tools won’t deliver”, she added.
According to a 2025 report by the House of Commons public accounts comittee, more than 60 per cent of public sector organisations cited access to quality data a barrier to implementing AI and digital tools.
Meanwhile, over 70 per cent reported difficulties recruiting staff with the right skills to manage transformation projects.
A gap in leadership
Private firms like Perago or PwC are playing a growing role in delivering digital transformation across councils.
While some local leaders credit these partnerships with unlocking new partnerships with unlocking new approaches, others argue they create dependency and can be difficult to scale internally.
A senior IT officer at Midlands council, said: “Consultants help us get things moving, but unless we invest in internal capacity, we’re always going to be reliant on external teams. That’s not sustainable in the long term.”
Perhaps the most critical challenge is at the top, with many councils lacking chief digital officers or transformation leads.
Without strong leadership and cross-department collaboration, projects often become siloed, with limited long-term impact.
“Digital transformation only works when it’s embedded into the fabric of an organisation”, said Church. “You can’t bolt it on to existing structures and expect magic.”
Looking ahead
While individual success stories like Caerphilly and Walsall Councils show what’s possible, experts agree that systemic reform is needed to unlock the full potential of digital services.
That includes better national coordination, shared platforms and data standards, and clearer guidance on procurement and delivery.
Without that, local authorities risk repeating past mistakes, or failing to modernise at all.
Councillor Sean Morgan said that this process “isn’t simply about cutting services; it’s about flexibility and finding different ways to deliver what our communities need, when they need it”.