AI can free up £8 billion each year for councils, says Tony Blair Institute report

Harnessing artificial intelligence (AI) could save local authorities a total of £8 billion a year across England and Wales, according to a new report from the Tony Blair Institute (TBI).

“Governing in the Age of AI: Reimagining Local Government”, highlights how councillors can reduce costs, increase efficiency, and improve outcomes for residents by championing AI solutions.

To inform the report, the authors partnered with a local council to analyse the tasks undertaken by their staff and understand where AI would be able to support their operations.

Analysis by TBI discovered that 26% of tasks could be automated or improved by AI, which would save one million hours of work a year for just one council. Extrapolating this data to the national level, this represents time savings worth £8 billion a year – or £325 per household – for local government in England and Wales, all while clearing backlogs and providing better services for residents.

The authors also note that these savings can be made before considering tasks outsourced by local governments. With AI, councils can bring this work back in-house at a fraction of the cost, giving local governments more control over day-to-day operations, such as processing applications and providing statutory services, and unlocking further time and monetary savings.

Councils can choose how to realise these savings, whether it's to clear service backlogs; ensure staff such as social workers can spend more time on face-to-face work; re-invest into the local community; or put money back into taxpayers' pockets.

Alexander Iosad, Director of Government Innovation Policy at TBI, said:

“Local government has shown in the past how it can be an engine of change but is at risk of sputtering. To keep it moving forward, it's critical that they seize this moment. 

“By embracing new, AI-enabled tools, local government can deliver a real sense of hope and momentum for citizens who depend on it day-to-day. We can clear the backlogs in social services and repairs, radically speed up planning permissions to meet government's housebuilding agenda, and build strong local economies deeply rooted in place. From fixing pot-holes to ambitious projects that transform the fortunes of communities, AI can make councils match-fit again.

“As new councillors of all political colours get to work, they have the once-in-a-generation opportunity to redefine their role, reimagine local government, and build a legacy of true leadership and change.”

The report outlines numerous use-cases, some already being deployed by councils, where AI can make a dramatic impact on public service performance. For instance, in adult social care, backlogs for assessments stood at 227,000 in March 2024, with further delays in creating care plans. As a result of these delays, many citizens end up in hospital, while social workers face unsustainable workloads.

AI enabled tools can support many of the key tasks in social work, including through transcribing conversations, creating care plans and streamlining documentation – all while maintaining a strong human connection where it matters most.

Several of these tools are already being trialled by local councils. Rather than spend countless hours ‘box ticking', social workers can spend more time on face-to-face support and improving the quality of care interactions.

AI can also provide support to councils to tackle the housing crisis and keep their residents' homes safe. Hammersmith and Fulham Council have piloted damp and mould sensors to enable early intervention, and prevent what could become serious, health-threatening issues. A dynamic remote-monitoring system is also enabling the council to remotely assess the performance of assets including lifts, boilers and electrical appliances. 

To unlock solutions like this on a national scale, the report recommends creating a ‘by-councils, for-councils' Devolved AI Service (DAIS). By providing tooling and support for local authorities to deploy AI into their services, DAIS would de-risk local innovation and unlock scaled transformation at pace.

The authors urge local councillors to begin acting now, including by adopting existing tools; collaborating with other local authorities and universities to take inspiration from effective pilots; reviewing AI literacy in council workforces, upskilling where needed; and taking measures to attract talent.

Cllr Rowan Ree, Cabinet Member Finance and Reform at Hammersmith and Fulham Council, said:

“Too often in local government, councils defend old fashioned, bureaucratic service delivery because ‘that is the way it has always been done'. The rapid technological development of recent years, has the potential to revolutionise local government, making councils more efficient and improving the services we can offer to residents. We welcome this report, its recommendations, and the opportunities technology brings to make local government ruthlessly financially efficient.”

Cllr Sean Thorpe, Bury Council Cabinet Member for Finance and Transformation, said:

“Today's report shows that AI can give our council back the time and the resources we need to deliver for our community, and we are already investing in digital skills for staff and citizens to make the most of this opportunity. Local government has enormous potential not only to support our citizens, but to drive our local economy forward, and reinvigorate our towns. The recommendations provided in this report would provide a vital step forward in making this potential a daily reality, as well as being of immediate support to our councillors.” 

Nathan Nagaiah, Lead at London Borough of Newham's Centre for AI in the Public Sector said: 

“We are proud to be leading the way in showing how AI can be used responsibly to deliver better outcomes for our residents. From improving housing services and tackling economic inactivity to strengthening community engagements, our UK Centre for AI in the Public Sector in collaboration with University of East London is already demonstrating the real-world impact of investing in innovation. We believe that with the right support and investment, innovative programme like Newham Data, AI can be a powerful tool to create more inclusive, efficient, and proactive public services; not just in Newham, but across the country.”