From Rayner to Reed: What Labour’s Shift Means for Local Government
- truthaboutlocalgov
- Sep 22
- 11 min read
Updated: Oct 2
In this episode we were joined by Joe Fyans, Head of Research at Localis, to unpack the implications of this political shift. Our conversation ranged from the future of local government reorganisation and funding formulas to the viability of Labour’s housing ambitions and the strategic risks posed by emerging political challengers.
A Change in Leadership: Continuity or Course Correction?
Angela Rayner’s exit was met with mixed emotions across the sector. Her tenure was marked by a visible commitment to local government, and her presence as a “heavy hitter” in the role gave the sector a sense of political weight. As Joe Fyans put it:
“It’s always disappointing when you lose a Secretary of State who’s a heavy hitter. But Steve Reed is also a heavy hitter he’s hardwired into Labour’s policy development and has a deep understanding of local government from his time leading Lambeth Council.”
Reed’s appointment, alongside Jim McMahon’s continued involvement, suggests Labour is doubling down on experience and strategic alignment. Reed’s background in local government leadership, particularly in a complex urban borough like Lambeth, positions him well to understand the operational realities of councils from housing pressures and community safety to fiscal constraints and workforce challenges. However, Joe hinted that the reshuffle may also reflect internal dissatisfaction with the pace and direction of local government reorganisation under Rayner’s leadership:
“We could probably take that as a signal that the central operation weren’t thrilled with the way reorganisation has been going so far.”
This raises important questions about Labour’s appetite for structural reform. The English Devolution and Community Empowerment Bill, which Rayner championed, proposed a more formulaic approach to unitarisation and mayoral governance. While the bill aimed to bring coherence to a previously ad hoc process, it also sparked concerns about democratic legitimacy, local identity, and the capacity of councils to absorb new responsibilities without adequate resourcing. Reed’s arrival may signal a recalibration less about abandoning reform, and more about prioritising deliverability and political pragmatism. With a general election on the horizon, Labour may seek to focus on policies that resonate with voters and demonstrate immediate impact, rather than complex governance changes that take years to bed in.
Local Government Reorganisation: A Race Against Time
One of the most contentious and complex areas of local government policy in recent years has been reorganisation particularly the push toward unitarisation and the expansion of mayoral combined authorities. In our conversation, Joe Fyans offered a sobering assessment of the current landscape:
“Even without official policy, unitarisation has carried on. The Devo Bill tried to put a formula on what had been ad hoc before.”
This observation reflects a broader truth: structural reform has been happening incrementally, often driven by financial pressures, local political consensus, or central government intervention in failing authorities. From Buckinghamshire and North Yorkshire to Somerset and Cumbria, the number of councils has steadily declined since 2017, even in the absence of a coherent national strategy. The English Devolution and Community Empowerment Bill, introduced under Angela Rayner, attempted to formalise this process. It proposed a framework for unitarisation and mayoral governance, aiming to simplify the patchwork of local authorities and create clearer lines of accountability. However, the bill was met with resistance from some quarters particularly district councils concerned about loss of identity, representation, and local responsiveness. Joe highlighted the fundamental challenge:
“There’s just no way they’re going to have time to do all of this. It’s not a public-facing issue. Most people just don’t care.”
This is a critical insight. While reorganisation may promise long-term efficiencies and improved service integration, it lacks the immediacy and emotional resonance of issues like housing, transport, or social care. In electoral terms, it’s a hard sell.
Policy Analysis: Why Reorganisation Matters But Struggles to Land
From a policy perspective, reorganisation is often justified on three grounds:
Financial Efficiency: Larger unitary authorities are seen as more cost-effective, reducing duplication and enabling strategic commissioning.
Service Integration: Unitarisation can support joined-up delivery across health, housing, education, and economic development.
Democratic Clarity: Simplifying governance structures can make it easier for residents to understand who is responsible for what.
However, these benefits are contingent on effective implementation, strong leadership, and adequate resourcing. Without these, reorganisation risks becoming a distraction rather than a solution. Moreover, the political calculus is shifting. With a general election approaching, Labour is likely to prioritise policies that deliver visible, voter-facing outcomes. As Joe noted:
“Renters’ reform, leasehold reform, planning reform these are things people can feel. Local reorganisation just doesn’t have that impact.”
This suggests that while the Devo Bill may remain on the table, its more ambitious elements could be delayed or diluted in favour of short-term wins.
Strategic Implications for Councils
For local authorities, this creates a dilemma. Should they invest time and energy in preparing for potential structural change, or focus on delivering core services within existing frameworks? Some councils particularly those facing financial distress or service failure may still pursue reorganisation as a lifeline. Others may adopt a “wait and see” approach, wary of committing to a process that may be politically deprioritised.
There’s also the question of capacity. As Joe pointed out, many councils are already stretched thin:
“There’s a lot to do in five years if you’re trying to do other stuff. You might think this is a better way to deliver public services, but the realpolitik is going to kick in.”
In short, while reorganisation remains a live issue, its future will depend on political will, public engagement, and the ability of councils to navigate uncertainty.
The Reform Party and the Politics of Place
As the Reform Party gains traction in local elections particularly in areas disillusioned with mainstream politics Labour faces a new strategic challenge: how to maintain momentum in its local government agenda while navigating a more fragmented political landscape.
Joe Fyans reflected on the lessons of the past, drawing parallels with George Osborne’s pragmatic approach to devolution:
“You can hark back to George Osborne and the Greater Manchester Combined Authority. He needed Manchester to have a mayor even if it was a Labour mayor because it was better than not having one.”
This sentiment underscores a key principle in place-based policymaking: function must trump faction. The success of devolution and reorganisation should not be judged solely by party politics, but by the ability of governance structures to deliver better outcomes for communities.
“If completing the map improves public services, it shouldn’t matter who the mayor is. The incentives will bring them to the table.”
Policy Analysis: Reform’s Rise and Labour’s Strategic Dilemma
The emergence of Reform as a credible force in local politics particularly in areas with high levels of deprivation, low voter turnout, or historic underinvestment poses a dilemma for Labour. On one hand, the party must defend its traditional strongholds and prevent further erosion of trust. On the other, it must continue to champion structural reforms that may empower non-Labour mayors and councils.
This tension is especially acute in the context of the English Devolution and Community Empowerment Bill, which seeks to complete the map of mayoral combined authorities and expand unitary governance. If successful, the bill could create new political spaces where Reform candidates gain executive power potentially disrupting Labour’s regional influence.
However, Joe offered a more nuanced view of what happens when populist parties enter the machinery of local government:
“Newly elected mayors, even from Reform, may quickly realise the complexities of local governance and become constructive partners in service delivery.”
This reflects a broader truth: once in office, the realities of budget constraints, statutory duties, and public accountability often temper ideological fervour. Mayors regardless of party must engage with civil servants, negotiate with Whitehall, and deliver services to diverse communities. In many cases, this leads to a more pragmatic and collaborative approach.
Strategic Implications for Labour and Local Authorities
Labour must now decide whether to double down on its devolution agenda, accepting the risk of empowering non-Labour leaders, or to recalibrate its strategy to retain tighter control over local governance. This decision will shape the party’s relationship with councils, combined authorities, and voters in the years ahead. For local authorities, the rise of Reform may prompt a renewed focus on community engagement, democratic legitimacy, and place-based leadership. Councils must demonstrate that they are responsive, transparent, and capable of delivering tangible improvements regardless of political affiliation.
There is also a risk that Reform’s presence could polarise local debates, making consensus-building more difficult. However, as Joe suggested, the incentives of office may ultimately encourage cooperation:
“Ultimately, the incentives will be such that they will come around the table regardless.”
In this context, Labour’s challenge is not just electoral it is philosophical. Can the party build a local government system that is resilient, inclusive, and effective, even when power is shared with political opponents?
Funding: Will London Get a Fairer Deal?
Funding remains one of the most persistent and politically sensitive issues in local government. With Steve Reed’s appointment himself a London MP and former leader of Lambeth Council there is renewed speculation that the capital may finally receive a more sympathetic hearing in Whitehall.
As Joe noted:
“There might be some hope in London that they’ll get a better airing. Steve Reed is a London MP with a strong understanding of the city’s challenges.”
London Councils have long argued that the current funding formula penalises the capital, failing to account for its unique pressures such as high homelessness rates, complex social care needs, and the cost of delivering services in a global city. Reed’s familiarity with these issues could lead to more nuanced policy conversations, particularly around fair funding and fiscal equalisation. However, Joe was clear-eyed about where the real power lies:
“It’s the Treasury, not MHCLG, that really matters when it comes to how much money local government gets.”
This reflects a structural reality: while the Department for Levelling Up, Housing and Communities (DLUHC) may advocate for reform, it is the Treasury that controls the purse strings. Even under previous Labour leadership, attempts to embed fiscal devolution into white papers were reportedly blocked by Treasury officials concerned about macroeconomic control and political risk.
Policy Analysis: The Limits of Fiscal Devolution
Despite widespread consensus among think tanks, academics, and council leaders that local government needs greater fiscal autonomy, progress has been slow. The UK remains one of the most centralised countries in the OECD in terms of tax-raising powers and spending discretion at the local level. Labour’s recent policy documents have hinted at a desire to revisit this balance potentially allowing councils more control over business rates, land value capture, and local levies. However, meaningful reform would require not just political will, but a fundamental shift in how central government views risk, accountability, and redistribution.
In the meantime, councils continue to operate under short-term funding settlements, often announced late and subject to political negotiation. This undermines strategic planning and contributes to the growing number of authorities issuing Section 114 notices or teetering on the edge of financial collapse.
Housing Delivery: Capacity, Skills and Strategy
Housing is a flagship issue for Labour, and Steve Reed’s appointment as Housing Secretary signals a renewed focus on tackling the crisis. But as Joe cautioned, the barriers to delivery are deep-rooted and systemic:
“There’s a mismatch of skills in construction. Local authorities lack capacity for long-term investment planning. Steve Reed can’t fix that from a desk in Whitehall.”
This is a critical point. While national policy can set targets and allocate funding, the actual delivery of housing depends on local capacity planning departments, development control, land assembly, and construction skills. Many councils have seen their planning teams hollowed out by austerity, making it difficult to process applications, negotiate Section 106 agreements, or develop local plans. Joe pointed to Labour’s recent policy paper advocating faster devolution as a potential route to addressing these challenges. The idea is that by giving councils and combined authorities more control over housing strategy, skills investment, and infrastructure funding, they can tailor solutions to local needs.
“We could use a lot more affordable housing in this country, but I didn’t get the sense that the issue was lack of effort it’s viability, skills, and capacity.”
Policy Analysis: Beyond Targets Towards Systemic Reform
Labour has committed to building 1.5 million homes over five years, including a significant proportion of affordable and social housing. But delivery will hinge on several factors:
Land availability: Reforming compulsory purchase powers and unlocking public land will be essential.
Planning reform: Streamlining processes while maintaining democratic oversight is a delicate balance.
Skills pipeline: Investment in construction apprenticeships and local labour markets is critical.
Financing models: Councils need access to long-term, low-cost capital to build at scale.
There is also a need to rethink viability assessments, which often allow developers to avoid affordable housing obligations. A more transparent and consistent approach could help councils secure better outcomes for communities. Ultimately, Reed’s success will depend not just on policy ambition, but on his ability to coordinate across departments particularly Treasury, Education, and Business to align housing delivery with economic and workforce strategies.
Sector Sentiment: Pragmatism Over Panic
As the dust settles on Labour’s reshuffle, the local government sector has responded with measured pragmatism. While Angela Rayner’s departure marked the loss of a high-profile advocate, Steve Reed’s arrival has been largely welcomed particularly by those who remember his leadership in Lambeth and his longstanding engagement with local government issues.
Joe Fyans summed up the mood succinctly:
“Most people in local government know Steve Reed and respect him. I wouldn’t expect a massive sea change more likely a shift in priority and focus.”
This reflects a broader truth: the sector is less concerned with personalities and more focused on policy continuity, delivery mechanisms, and departmental stability. With Jim McMahon remaining in post and Reed bringing deep experience, there is confidence that the core mission delivering housing, reforming services, and navigating the complex landscape of local governance will continue.
However, there is also a recognition that prioritisation will be key. Councils are facing acute pressures: rising demand, shrinking budgets, workforce burnout, and the need to deliver on climate, equality, and economic growth agendas. The sector is looking for clarity, consistency, and collaboration not radical upheaval. There is cautious optimism that Reed’s leadership may bring a more strategic and systems-focused approach, particularly in aligning housing, planning, and infrastructure with broader public service reform. But expectations are tempered by the realities of central-local relations and the constraints of the fiscal environment.
Conclusion: A Moment of Strategic Reflection
The transition from Rayner to Reed is not just a change in personnel it’s a moment for the sector to reflect on its priorities, its capacity, and its political realities. With Reed’s experience and Labour’s evolving policy agenda, there is potential for more strategic engagement, deeper devolution, and a renewed focus on delivery.
But as Joe reminded us, the clock is ticking:
“When 2029 starts to look a little closer, you’re going to want to focus more on things that people can feel right now.”
This is the central tension facing local government: how to balance long-term transformation with short-term impact. Structural reforms like unitarisation and fiscal devolution may promise future efficiencies, but they are complex, slow-moving, and politically risky. Meanwhile, voters are looking for tangible improvements better housing, safer streets, cleaner air, and responsive services.
The next few years will be critical in determining whether that balance can be struck. Success will depend on:
Clear national leadership that empowers local actors.
Robust local capacity to deliver and innovate.
Genuine collaboration across sectors and political boundaries.
A shared vision for place-based growth and inclusive public services.
As we move forward, the sector must remain agile, strategic, and focused on outcomes. The reshuffle may be a turning point but whether it leads to transformation or stagnation will depend on what happens next.
