Accounts Commission: Councils in Scotland face uncertain financial future

Local authorities in Scotland are facing an “uncertain” financial future, a watchdog has said.

A report published by the Accounts Commission on Thursday showed there had been a 4.2% real terms reduction in funding between 2013-14 and 2020-21 when all Covid-19 related funding is removed.

Councils, the report said, would have to face the impacts of the pandemic as well as issues which pre-date it, such as poverty, in the future.

Local government funding is announced annually, which the watchdog said “makes it challenging for councils to plan and budget effectively for the medium and longer term and creates uncertainty over future funding”.

“The long-term funding position for councils remains uncertain, with significant challenges ahead as councils continue to manage and respond to the impact of Covid-19 on their services, finances and communities,” the report said.

“In the longer term, uncertainty creates challenges for councils as they seek to address cost and demand pressures that existed before the impact of Covid-19, as well as develop long-term plans with their partners to address complex issues such as child poverty and inequalities, to improve economic growth and to deliver Scotland’s net-zero ambitions.”

All of Scotland’s 32 local authorities, auditors say, will have to revise their medium term financial strategies to take into account the impact of the pandemic.

William Moyes, the chairman of the Accounts Commission, said: “Councils face serious challenges, driven by financial constraints, increasing demands on service and resource.

“Alongside these longer-term issues are the financial uncertainties caused by the impacts of Covid-19, including loss of income and additional costs.

“Now, as we look ahead and beyond council elections in May, councillors must determine how to restart services, deliver differently, save money and empower communities.

“They must do so alongside focusing on national priorities, including climate change.

“Whilst councils must address longer-term financial planning, having in place funding certainty – beyond a one-year settlement from the Scottish Government – remains a critical issue.”

Calls have been made in recent years for the Scottish Government to lay out multiple-year, spending plans to allow for local authorities and other services to plan ahead, a proposal made easier given the power sharing arrangement with the Scottish Greens that all but guarantees the passage of Government budgets.

Scottish Tory local government spokesman, Miles Briggs, said the report “paints a stark picture” of the challenges faced by councils.

“A 4.2% real-terms cut is completely unsustainable – and when increasing areas of funding are ring-fenced by the SNP, councils are being forced to slash spending in other areas,” he said.

Mr Briggs added: “The SNP-Green coalition have cynically passed the buck to local authorities to either cut services or raise council tax to make ends meet because they are unwilling to give them the resources they need.

“The Scottish Conservatives are committed to a fair funding deal for councils, which would address the uncertainty over future funding for local authorities, which the Accounts Commission also highlight as a serious problem.”

A Scottish Government spokeswoman said local government had been “treated very fairly” in recent years.

“The Scottish Government is committed to protecting the health budget which has a direct impact on all other areas of the Scottish budget, including local government. Despite this, local authority revenue funding increased by 3.6% in cash terms between 2013-14 and 2019-20,” she said.

“We are developing multi-year spending plans and will publish the findings of the Resource Spending Review in May 2022.

“This will include a review of all ring-fenced funding. While ring-fenced funding is for increased investment in services such as our schools and nurseries, local authorities have autonomy to allocate almost 93% – £11.8 billion – of the funding we provide in 2022-23, plus all locally raised income.

“Our shared vision and outcomes for Covid Recovery have been agreed with local government.

“Together, with business and the third sector, work is being co-ordinated to change the way we think about services so that they are focused on meeting the needs of individuals, and working differently across boundaries to achieve our priority outcomes for recovery.”