‘Real cost risks’ in future for councils
The finances of Scottish councils are not unsustainable, but there are real risks in the future, a watchdog has warned.
The latest report on council finances from the Accounts Commission said the total budget gap in the country’ s local authorities rose to £725 million for the next financial year – almost double the £476m from the year before.
In england, a number of councils are struggling financially, raising the spectre of the same happening north of the border, with Middlesbrough Council appealing to the UK Government for financial aid to avoid declaring effective bankruptcy.
Local authority body Cosla said the report showed how shaky the financial ground is for councils and highlights the need to secure a “solution to these long-term issues in order to protect the essential front line service of our communities”.
The report said: “Local appointed auditors did not identify any council sin Scotland as being financially unsustainable in the short term. However, the financial outlook is extremely challenging, with scottish councilsfacing unprecedented financial and service demand pressures which present real risks for the future.
“Although Scottish Government core funding increased in cash and real terms in 2023/24, councils reported a significant increase in the total budget gap to £725m.”
The report added: “Councils’ medium and longer-term financial plans demonstrate a clear recognition of the difficult financial context and the need to continue to innovate at pace and make difficult decisions to become more financially sustainable. But some councils are already experiencing significantresistance when seeking to make service reductions to balance budgets.
“This reinforces the need for effective consultation and engagement with communities on planned local service changes.”
Last summer, the Scottish Government and Cosla signed the Verity House Agreement – a deal between the two bodies that pledged to create a fiscal framework for councils as well as better long-term budgeting.
The Accounts Commission said meeting the commitments of the agreement would be “important”, increasing financial certainty and flexibility for councils.
Cosla’s resources spokeswoman Katie Hagmann said some of the messages from the Accounts Commission report were “stark”, but “came as no great surprise” to councils.
“Years of real-terms cuts to council budgets have been coupled with increasing additional policy commitments and increased ring-fencing.”
The report also took aim at the Scottish Government’ s proposedcouncil tax freeze for next year.
The policy, announced by first Minister Humza Yousaf at the SNP conference in Aberdeen, will see councils given a share of £144m to fund it. But the decision drew the ire of councils, which claimed there had been no consultation on the issue before it was announced.
A spokesman for the Scottish Government said: “In the face of a profoundly challenging financial situation, we are making available record funding of over £14 billion to councils –a real-terms increase of 4.3 per cent compared with the 2023/24 budget.”
Councils face unprecedented financial pressures which present real risks for the future