Council warns of bankruptcy due to pay rises

‘Detrimental impact on services’

SCOTLAND’S largest council could go bankrupt by the end of the year after a Scottish Government pledge to hike the salaries of its workers.

Crisis-hit Highland Council said its reserves had already been left ‘critically low’ as a result of an overspend of £5.1million this year.

But a finance chief has now warned that SNP legislation lifting the 1 per cent pay rise cap of council workers could push the authority over the edge, extending the predicted budget black hole to £66.7million over the next three years.

Council finance director derek yule said the problem has been compounded by other factors, including a cut to its budget by the SNP, a failure to hit running cost targets and foster care costs for children, as well as an overspend on its winter maintenance budgets of £2.2million in the wake of this year’s extended onslaught of snow and ice.

Budget leader alister mackinnon told a council meeting: ‘If we have another hard winter, there is a very high possibility this council would be insolvent. We need to raise income from assets such as car parking.’ Finance chiefs predict a £23.8million budget gap in 2019-20, a £21.3million black hole the following year and £21.6million in 2021-22.

according to council documents, there are two major issues effecting the budget – increasing running costs, including staffing and inflation of £29.6million over the three years, and a decrease in central government funding, known as a revenue Grant, of £8million.

In a bid to combat the problem, bosses announced a council tax rise of 3 per cent, creating another £1.4million of income. It also launched extra service costs for residents, including parking charges.

Overall, the data shows that despite raising almost £1.67billion over the three years, the council’s outgoings are predicted to come in at around £1.73billion.

mr yule blamed the increased staffing costs on the Scottish Government announcement that it was lifting the 1 per cent pay cap for council employees.

The move also guarantees a minimum increase of 3 per cent for staff on £36,500 or less.

mr yule told councillors: ‘We are suggesting a savings target of £66.7million over the next three years based on a core cut in the council’s annual grant of 1 per cent per annum and a 3 per cent pay award.’

The funding gap has become so prevalent among local authorities, the Convention of Scottish Local authorities (Cosla) is planning to raise the issue at Holyrood.

a Cosla spokesman said: ‘Cuts to the local government budget have a detrimental impact on the essential services councils deliver.’

Tory mSP donald Cameron said: ‘Councils right across Scotland are facing massive financial pressures and that has been exacerbated by the SNP’s funding decisions.

a Scottish Government spokesman said: ‘Highland Council has received more money this year – not less – from the Scottish Government.’