MSPs raise concerns about ‘large council tax rises’ in Budget report

Financial pressures on Scotland’s local authorities could lead to “large council tax rises”, MSPs on Holyrood’s Finance Committee have warned.

In a new report, the MSPs said they had “significant concerns” around the fiscal pressures on local government, saying this could also see some councils “struggling to meet their statutory obligations”.

They raised the issue in a report on the Scottish Government’s draft Budget for 2026-27 – with MSPs also highlighting concerns that spending on social security is leading to the budgets for other areas being “squeezed”.

The committee further hit out at the Scottish Government over the need for “greater transparency” on its spending plans.

The Institute for Fiscal Studies think tank complained that the Budget document “continues to bury the most appropriate spending figures in an annex” and MSPs on the Finance Committee added they were “frustrated and disappointed” that ministers have “fallen short of baselining all routine in-year transfers”.

In its report, the committee said: “We cannot understand the Scottish Government’s continued resistance to carrying out this request when it would bring much-needed transparency, clarity and understanding to its spending plans.”

On funding for councils, the report noted the draft Budget for 2026-27 includes a 2% real-terms  increase in cash.

But the committee said “there are questions around the accuracy of this figure”, going on to note that economics expert Professor Mairi Spowage, of the Fraser of Allander Institute think tank, had said the rise was “unlikely” to prevent “what will probably be fairly large” increases in council tax.

As a result, the MSPs called on the Scottish Government to discuss with councils “how and where further support might be provided” to ease their financial pressures .

The report added: “The committee has significant concerns that the pressures on local government finance may lead to large council tax rises and some local authorities struggling to meet their statutory obligations.”

MSPs also used the report to raise “continuing concerns” regarding the impact of spending on social security on other areas of Holyrood’s Budget, which it said “are being squeezed” as a result.

The report insisted that ministers had not yet “provided sufficient evidence of the sustainability of the social security budget”.

The committee had previously urged ministers to review this area and the report said it “is  disappointing that the Scottish Government has not carried out the work we asked for”.

Concerns were also raised about a “lack of clarity and transparency” over whether some spending commitments in the Scottish Budget are “new money”.

To combat this, the committee “requests that the Scottish Government makes absolutely clear in future budgets what elements of funding is ‘new money’, to provide certainty for public bodies and local government, and avoid the unhelpful and unnecessary confusion that has occurred this year”.

Finance Committee convener Kenneth Gibson said: “Frustratingly, some cross-party concerns set out in this report have been raised before with the Government during this five-year session of Parliament – including issues of financial transparency, which have only been partly addressed.”

He noted that this would be the committee’s final Budget report ahead of May’s Holyrood election, adding: “Some recommendations are directed towards the Government for immediate action, others will be for the next administration to take forward after May.”

The Scottish Government has been contacted for comment.