I was at a local government conference recently and someone said to me, “You can’t run a business like a council, but you can run a council like a business.”
The idea is catchy until you spend five minutes looking at how businesses work. Because councils don’t operate in a business market at all. They operate in a space where the basic conditions for competition don’t exist. And when you treat a council like a business, you get worse services, poorer outcomes, and a hollowed-out local government.
This mindset is killing public services. And the truth is simple: you literally can’t run a council like a business.
Here’s why.
1. Councils are natural monopolies
A business succeeds because you can choose its competitor. You can’t choose your council. You can’t switch provider. You can’t shop around for better bin collections, safer roads, or better protection for vulnerable children. Yes, you can move, but you’re always stuck with one provider.
When a service is delivered by one provider and it makes no sense to have multiple providers duplicating infrastructure, it’s called a natural monopoly. Energy grids. Water. Rail. And yes, local authorities.
Natural monopolies must be run for public value, not profit, because customers have no ability to leave. Councils are no different. There is no market discipline because there is no market.
2. Councils provide public goods
A public good is something that is non-excludable and non-rivalrous. In plain English:
You can’t be stopped from benefiting from it, and your use doesn’t reduce anyone else’s.
Street lighting. Clean air. Safe parks. Children’s safeguarding. Environmental health. Local democracy itself.
These are nothing like commercial products. You can’t sell them to individuals. You can’t restrict access as an incentive. And you don’t want to. Public goods produce benefits that spill out across the whole community, even for people who don’t use them directly.
If you turn a public good into a pseudo-product, you weaken the very thing that makes it work.
3. Councils exist to correct market failures
Markets are brilliant at producing what is profitable. They are terrible at producing what is essential but unprofitable.
Care homes. Homelessness support. Libraries. Public health. Local welfare schemes. Youth services. Trading standards. Building control. Flood prevention.
If these services operated purely as commercial activities, many would not exist at all. Councils provide them precisely because the market does not.
Running a council like a business means importing the logic of the market into the one place designed to fix the limits of the market.
4. Councils can’t choose their ‘customers’
A business can target the profitable customers and avoid the costly ones. A council can’t. Councils are legally obliged to support the most complex and expensive residents: people in crisis, families with high needs, children at risk, older people requiring intensive support.
This isn’t inefficiency. It’s the job.
When financial pressure forces councils into commercial behaviour, the result is predictable: services that are easiest to charge for expand, and services that are most essential contract.
5. Councils are funded like a household but expected to perform like a corporation
The real problem isn’t that councils aren’t commercial enough. It’s that we’ve trapped them in the worst of both worlds.
We ask them to behave like businesses, while tying them to an unstable, regressive local tax base. We make them compete for grants. We ask them to sell assets to fund services. We pressure them to generate income to plug gaps in statutory duties.
This is not strategy. It is a structural contradiction. And it’s why the local state is collapsing.
The real question is not how councils can be more commercial
It’s why we expect a natural monopoly that delivers public goods and corrects market failures to operate within the logic of profit at all.
Councils are part of the foundational economy. They are infrastructure. They are safety nets. They are the mechanism by which communities function at all.
You cannot run a council like a business for the same reason you cannot run the NHS like a business or the fire service like a business. Public services do not work on competitive logic, and forcing them to do so makes them worse for everyone.
If we want better services, and better policy, the answer isn’t commercialisation. It’s rebuilding the local state on the principles it was designed for: universality, equity, and public value.
If you want to understand public services at a deeper structural level, I run Better Policy Masterclasses for teams and leaders. Get in touch if you want to explore policy coaching or organisation-wide sessions.