Scottish councils could face £780m shortfall gap, report shows

The Accounts Commission have revealed local authorities are currently facing a budget gap of £585m this financial year – but matters are only set to get worse.

Last week the commission published a report on the financial state of councils in Scotland at a budget briefing prepared by Audit Scotland. Stark conclusions were drawn which highlighted that if councils were to make any improvements, ‘ever tougher decisions’ would have to be made. These include councils having to raise money through charging citizens for some services and using reserves.

Experts found that this year’s budget gap represents 3.5% of councils’ total revenue budget.

According to the budget briefing, the 2024/25 funding allocation of total revenue to local government has increased by 5.7%, but money remains constrained as most of the increase is directed to funding to deliver central government pledges.

The majority of local authorities in Scotland were planning to increase their budgets by increasing council tax in 2024/25, however in the Autumn of 2023 the government announced a council tax freeze in a bid to help locals struggling with inflated living costs.

Although, the financial blows for councils don’t stop there. Within the report, the Accounts Commission have highlighted that councils could be facing a budget shortfall worth £780m by 2026/27.

Derek Yule, from the Accounts Commission, has claimed it is ‘getting harder for councils to do more with less.’

Derek added: ‘They have to find and then deliver significant levels of savings to address budget gaps. Fully engaging with local people and being clear about the different and difficult budget choices is vital, whilst understanding the impacts on the most vulnerable.’

This is the first year that findings from the budget briefing have been made public. The Accounts Commission said the ‘wide range’ of approaches councils take to budget setting and the level of information, and the way that it is publicly reported, made it ‘challenging to report a definitive national position’.

Following this, Derek said councils in Scotland must improve the way they present financial information.

Reacting to the dire financial states of local authorities, COSLA – a councillor-led, cross-party organisation championing the work of Scotland’s councils, is calling for a ‘real’ and ‘meaningful’ solution to address the problem.

Katie Hagmann, COSLA’s resources spokesperson, said: ‘It is vitally important that these concerns, which have been consistently raised by COSLA Leaders and are now backed up by evidence presented by the Accounts Commission, are acted upon for the sake of Scotland’s public services and our communities who rely upon them.

‘Now is the time to take real action. [The] Accounts Commission report is an accurate portrayal of where we are now. The reality right now for councils has never been more challenging.

‘The effect of years of real-terms cuts to core budgets have been compounded by additional policy commitments and less flexibility in how we allocate increasingly directed budgets. This makes the ability to take local decisions on most of our budget, almost impossible.’

Image: Chris Robert