When he retired as LGA chair nine years ago, Merrick Cockell concluded that the sector had survived the toughest period of reduced funding in his lifetime in local government. Whilst no one expected the funding taps to gush again, he didn’t believe the sector could survive continued austerity.

Local government took justifiable pride in the way it had weathered vast grant reductions – or for many, the phasing out of overall Government grants – whilst local satisfaction surveys continued to show that residents trusted local service providers more than national government and hadn’t noticed a deterioration in the services provided. Unfortunately, Westminster and Whitehall read the same surveys and saw no reason not to keep on cutting.

Councils’ seemingly endless capacity to cope through finding more savings or by service transformation, in the end cannot defy the laws of nature or economics. The LGA has consistently said that the scale of the pressures cannot be met by reducing costs, making efficiencies or raising council tax, but the difference now, nine years on, is that events of recent years plus accumulative funding reductions have met inflation head-on. The invisible impact of austerity 10 years ago is no more, and the deterioration of some essential public services is now all too visible.

So where does that place local government at the start of 2023? Like most sectors, it will face political uncertainty during the run up to the general election due by the end of next year. Given the current polling both officials and politicians will be scrutinising and trying to influence Labour's agenda as well as lobbying Government.

Some may welcome the way the political realities have meant the cap on social care costs and significant changes to planning have been kicked into touch, just because they are not being added to an already crowded agenda. There will also be opportunities to conclude initiatives already in train such as the Cornwall and North East devolution deal offers.

However, while the political scene is less turbulent than it was in 2022, continued poor polling numbers and backbench unrest may result in Government feeling the need to take action in response. Legislation on issues such as wind farms or new homes may emerge sooner than expected and the sector will need to be alert to both threats and opportunities. Equally, as this May there will be over 200 unitary, metropolitan and district councils having all-out or partial elections, there could well be local political change to manage.

What is certain is that the scale of the challenge facing local government in 2023 will continue to increase. There is now a requirement not only to ‘do things cheaper’, but also clear expectations from local communities and Whitehall to ‘do things better’. This pressure is amplified by the way aspects of the public sector are facing the impact of the emerging and latent demands that have resulted from the pandemic.

Innovation can provide answers, but it is important to know what that really means. It is not about the latest gizmo or gadget; rather, the journey from the seed of an idea to the realisation of value from that idea. It means truly understanding what the need is, being sceptical about some of the hype from technology providers, and being willing to embrace new ways of thinking.

Given the pressures on leaders just to prevent current services from falling over, simply carving out the time to think about new ideas is another challenge. That means innovation in local government should be a collective effort. For example, the London Office of Technology and Innovation (LOTI) is helping boroughs work together to bring the best of digital and data innovation together to improve public services and outcomes for Londoners.

Or it can be in conjunction with commercial partners. For example, Hampshire County Council’s health and social care directorate’s solution co-developed with PA Consulting during the pandemic, which used automated call services and artificial intelligence, to help the council prioritise 53,000 individuals on the shielding list who needed help the most. They are now using the innovative approach to carry out its statutory review process of care packages.

In what will be yet another tough year, councils will need all its capacity to develop new solutions and can only hope that Government will let them get on with what they do best, meeting the needs of local people.

Sir Merrick Cockell is a senior adviser and David Rees is head of local government at PA Consulting.