Potential financial shortfall of £780 million for Scottish councils as per the findings of a recent report
Financial Struggles of Scotland's Local Authorities Highlighted in New Report
A recent report by the Accounts Commission has shed light on the financial challenges facing local authorities in Scotland, with a projected budget gap of £585 million for this financial year and potential gaps worth £780 million by 2026/27 [1][2].
Derek Yule, a member of the Accounts Commission, emphasized the need for councils to improve their financial reporting and make tough spending choices, as it is getting harder for councils to do more with less [3]. He also highlighted the importance of fully engaging with local people, being clear about budget choices, and understanding the impacts on the most vulnerable.
COSLA, a councillor-led organization, has called for a 'real' and 'meaningful' solution to address the financial problems faced by local authorities. However, no specific solutions or proposals have been put forward by COSLA at this time [4].
The current financial struggles of local authorities are against the backdrop of a significant fiscal deficit at the national level. According to the 2024-25 Government Expenditure & Revenue Scotland (GERS) report, Scotland faces a net fiscal deficit of £26.5 billion (11.7% of GDP), or £30.6 billion (14.4% of GDP) excluding North Sea revenue [5].
The Scottish Government's budget allocation to local government has increased by 5.7%, but most of the increase is directed towards funding central government pledges. This leaves councils with limited flexibility in their budget allocation [6]. As a result, many local authorities were planning to increase their budgets by increasing council tax in 2024/25, but a council tax freeze was announced by the government in the Autumn of 2023 [6].
The budget gap represents 3.5% of councils' total revenue budget, and the effect of years of real-terms cuts to core budgets, compounded by additional policy commitments, has made it almost impossible for councils to make local decisions on most of their budget [4].
The report from the Accounts Commission is seen as an accurate portrayal of the current financial challenges faced by councils in Scotland, and further discussions and negotiations are expected to take place between the Scottish and UK governments to find solutions to address these issues.
Sources:
- Accounts Commission Report: Budget Briefing 2023
- Scottish Government: Local Government Finance
- Accounts Commission: Derek Yule's Statement
- COSLA: Statement on Accounts Commission Report
- GERS 2024-25 Report
- Scottish Government: Autumn 2023 Statement
- The financial challenges facing local authorities in Scotland, as highlighted in the Accounts Commission's report, necessitate improved financial reporting and tough spending choices by councils, considering the projected budget gap of £585 million this year and potential gaps worth £780 million by 2026/27.
- As the Scottish Government's budget allocation to local government increases, there is limited flexibility in budget allocation, as most of the increase is directed towards funding central government pledges rather than addressing the financial concerns of local authorities.
- The financial struggles of Scotland's local authorities are also influenced by general-news issues such as politics, policy, and business, as they deal with a net fiscal deficit at the national level, which affects their financial management and service delivery in the long run.
